CHANGE UP

If you care about climate change, it’s getting easier to find companies to invest in

Obsession
Energy Shocks
Obsession
Energy Shocks

Anyone who wants to put their money into climate-friendly businesses—like renewable energy or electric cars—has long been able to identify suitable companies or invest in “green” indices. But it’s been more difficult to avoid, or at least hedge against, investing in companies that actually worsen climate change. That, finally, is changing.

Most companies in most countries aren’t required to measure, much less declare, the extent of their carbon emissions. It can also be hard to tell, from the outside, how carbon-intensive a company’s business actually is. There have been moves by some groups to divest from fossil-fuel companies, but it isn’t just oil giants or coal drillers that have an impact on the climate, or rely on polluting technologies—they’re just the most obvious.

In the past year, though, there has been a marked rise in the number of companies that set their own internal “price” for carbon emissions and self-report the figures. In 2015, 437 companies around the world used such a guide, up from 150 the previous year.

The list of those companies (pdf) was released recently by CDP, a charity that collects data on carbon emissions and has the stated aim of helping to mitigate climate change. In the report, companies said they were driven by pressures including the desire to incentivize investment in clean energy and reducing emissions. One major motivation was the desire to pre-empt future regulations and taxes on carbon emissions. (Only some places, like Europe, California, and South Korea have carbon markets, which set a price for each unit of carbon emitted and charge some companies, for example energy produces, for their use. Others—like China—are considering creating a carbon market).

The companies that now report their internal carbon intensity still represent less than 10% of all the companies that make reports to shareholders worldwide. But they include some very well-known names and brands like Colgate-Palmolive, General Motors, and Campbell’s soup. The biggest increase in reporting came from Asian companies, CDP said, with 10 times more companies in that region reporting this year than last, including car makers Mazda and Nissan.

Last week also saw the launch of three new indices in London, aimed at sidestepping risks related to climate change. S&P Dow Jones Indices, which provides financial market indices, said that it would provide an index that overweighted companies with low emissions levels; one that excluded companies with fossil fuel reserves; and one that measured the performance of companies with a reduced “carbon footprint.”

Yesterday (Sept. 21), a new global index designed to quantify companies’ energy-related risk—the Energy Productivity Index for Companies—was unveiled. Brian Rice, a portfolio manager at the California State Teachers’ Retirement System (CalSTRS), a huge pension fund which backed the project, said in a press release that better energy use was “a strategic business tactic with growing importance.”

“It is associated with mitigating carbon pollution—which in turn reduces business risk,” he said.

While climate change may still be up for debate in some political arenas, business increasingly seems to prioritize action over discussion.

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