This Article is from Reuters News Sesvice on PLANET ARK :
Climate change set to impact global markets - report
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UK: February 19, 2003
LONDON - Global warming is set to have a big impact on
financial markets as investors revalue companies based on
their exposure to climate change risk, according to a
report published.
Businesses could face huge extra costs from increasingly
frequent natural disasters and from new legislation aimed
at reducing emissions of global warming gases, the report
by the Carbon Disclosure Project says.
Some could see their value slashed - by as much as 40
percent for some heavy carbon emitters, said the report,
which was commissioned by a group of institutional
investors overseeing around $4.5 trillion of assets.
Others that identify the risks and implement policies to
reduce them will have a competitive advantage, boosting
their share price.
"It is almost certain that in the years ahead, a series of
trends will continue to amplify the financial impacts of
climate change," said Tessa Tennant, Carbon Disclosure
Project chairperson.
"This is about security of financial returns as well as
about protecting the global environment."
Despite the huge risks and rewards, however, many of the
world's top companies are ignoring climate change.
Although 80 percent of respondents in the survey of the
world's 500 largest companies recognised climate change as
a financial risk, only 35 percent to 40 percent have taken
action to mitigate the dangers.
HEAVY WEATHER
The business world faces threats from climate change on
several fronts. Industries such as agriculture and tourism
are vulnerable to increasingly extreme weather conditions.
But the effects will be felt across most sectors. With
economic losses from natural disasters doubling every 10
years, banks' and insurers' profits are at risk.
Also, governments are increasingly looking at regulating
carbon emissions. Industries such as oil, gas and
manufacturing are obvious targets for regulatory action.
The European Union, parts of the United States and Japan
all plan new laws.
Likely tax increases will push up the cost of energy,
hitting all industries.
There are gains to be made as well. Reducing carbon
emissions can make companies more efficient.
Whole new industries and sectors will also develop,
bringing big rewards for companies able to exploit them.
For example, the renewable energy market will grow to
around $1.9 trillion by 2020 from between $234 billion and
$625 billion in 2010, the report says.
With the financial impacts of climate change becoming
clearer, investors are beginning to push for change.
Fund companies are increasingly channelling investment
into companies that adopt high standards on environmental,
social and ethical issues. The belief is that companies
which manage these risks are likely to provide better
long-term returns to shareholders.
In Britain, parts of Europe and Australia, legislation is
also pushing big investors such as pension funds to act,
adding to the pressure on companies.
"This report is required reading for directors, executives
and investors everywhere," said Tennant.
"Companies failing to take the messages of this report
seriously are likely to hear from their shareholders."
Story by Simon Johnson
REUTERS NEWS SERVICE
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