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Carbon Transparency

Public companies face rising pressure to disclose climate-change risks.

Fortnightly Magazine - May 2008

include, among other things, the effect of changes in weather on a company’s performance, as well as the health of the workforce and the cost of adaptation to the changing climate. With regard to fixed-asset risk, the company might consider exposure, age and projected life, energy use, fuel-switching capabilities and proximity to the coastline. Product risk might include an assessment of energy demand and fuel use, energy efficiency and low GHG alternatives. Finally, the company could evaluate its competitive risk, considering its ability to respond to changing regulations and new markets and the introduction of climate-friendly products.

As GHG-emissions regulation becomes more common, and climate change continues to progress, the effect of climate change and GHG-related regulatory developments on a company’s business is becoming an important consideration for investors and corporate executives alike. Investors increasingly are demanding more information about climate-change risk, and public companies feel rising pressure to disclose such risk. Regardless of whether the SEC or another federal, state or local government authority adopts additional climate-change disclosure requirements, public companies, particularly those in the utility and energy sectors, will need to consider whether, and how, to respond to mounting public pressure to make climate-change risk disclosure more transparent.