Wall Street Discovers Climate Change
Wall Street Discovers Climate Change
By Kim Chipman
Bloomberg
WASHINGTON -- The deadliest hurricane season in more than a century has some Wall Street investors sounding like members of the Sierra Club.
Firms including Goldman Sachs and JPMorgan Chase are telling U.S. clients for the first time that climate change poses financial risks. With damage estimates for Hurricanes Katrina and Rita as high as $200 billion, an increasing number of investors are joining public pension funds in urging action on global warming, which scientists say may be making storms more powerful.
"Definitely there will be more attention paid on Wall Street to natural disasters and global warming," said Michael Johnston, a New York-based investment strategist at Capital Group, the third-largest U.S. mutual-fund firm, which manages more than $1 trillion.
Katrina hit the Gulf Coast on Aug. 29, followed three weeks later by Rita, at its peak the third-most-intense Atlantic hurricane ever. The devastation disrupted energy supplies, and insurers and economists say they worry about another big storm hitting this year.
"Katrina is going to be a big stimulus for Washington to act," said Morton Cohen, a hedge fund manager at Clarion Group, which manages $200 million in assets, almost half of which are energy-related. "It's pretty obvious we have to do something about building refineries in this country and diminishing our amount of coal-burning toxins."
U.S. President George W. Bush has questioned the science behind climate change and rejected calls for a mandatory federal cap on carbon dioxide and other greenhouse gases.
Katrina will make Bush's opposition to mandatory limits harder to defend, some say. The idea that hurricanes are becoming more devastating in the Gulf "is difficult to avoid," Neil McMahon, a London-based oil industry analyst at Sanford C. Bernstein & Co., said in a Sept. 2 report to clients. "More worryingly, recent research suggests that this trend is highly likely to continue as it's linked to global warming."
Possible steps to curb greenhouse gases include a mandatory carbon emissions limit that would require companies to install new equipment and possibly revamp operations; a carbon emissions-trading program; and a renewable energy initiative, already adopted by several states, that calls for a certain percentage of power supplies to come from wind or other alternative sources.
The expense of such steps gives some investors and politicians pause, said John Holdren, environmental studies professor at Harvard University. "The real consequences are far away," Holdren said. "The cost of doing something is immediate. There's a strong temptation to say 'wait and see."'
"Analysts are worried about the next 12 hours; climate change is way too long-term for them," said William Andrews, who manages about $4.5 billion at C.S. McKee & Co. in Pittsburgh, including Chevron shares.
Even before Katrina, Goldman's chief investment strategist, Abby Joseph Cohen, was signaling a shift on Wall Street. "Environmental issues, in particular climate change, are receiving increased focus from the investment community," Cohen said in an Aug. 26 report to clients.
Responding to pressure from pension funds and other investors, companies are factoring climate change into the risks and opportunities faced by their businesses, according to the Carbon Disclosure Project, a group of 155 institutional investors who oversee $21 trillion.
The group includes the California Public Employees' Retirement System, which is talking to the U.S. Securities and Exchange Commission about requiring companies to disclose their carbon-related risks, said Winston Hickox, portfolio manager for environmental initiatives and former head the California Environmental Protection Agency.
Hickox said it was "just a matter of time" before the White House catches up with states, companies and investors and "gets serious" about climate change.
By Kim Chipman
Bloomberg
WASHINGTON -- The deadliest hurricane season in more than a century has some Wall Street investors sounding like members of the Sierra Club.
Firms including Goldman Sachs and JPMorgan Chase are telling U.S. clients for the first time that climate change poses financial risks. With damage estimates for Hurricanes Katrina and Rita as high as $200 billion, an increasing number of investors are joining public pension funds in urging action on global warming, which scientists say may be making storms more powerful.
"Definitely there will be more attention paid on Wall Street to natural disasters and global warming," said Michael Johnston, a New York-based investment strategist at Capital Group, the third-largest U.S. mutual-fund firm, which manages more than $1 trillion.
Katrina hit the Gulf Coast on Aug. 29, followed three weeks later by Rita, at its peak the third-most-intense Atlantic hurricane ever. The devastation disrupted energy supplies, and insurers and economists say they worry about another big storm hitting this year.
"Katrina is going to be a big stimulus for Washington to act," said Morton Cohen, a hedge fund manager at Clarion Group, which manages $200 million in assets, almost half of which are energy-related. "It's pretty obvious we have to do something about building refineries in this country and diminishing our amount of coal-burning toxins."
U.S. President George W. Bush has questioned the science behind climate change and rejected calls for a mandatory federal cap on carbon dioxide and other greenhouse gases.
Katrina will make Bush's opposition to mandatory limits harder to defend, some say. The idea that hurricanes are becoming more devastating in the Gulf "is difficult to avoid," Neil McMahon, a London-based oil industry analyst at Sanford C. Bernstein & Co., said in a Sept. 2 report to clients. "More worryingly, recent research suggests that this trend is highly likely to continue as it's linked to global warming."
Possible steps to curb greenhouse gases include a mandatory carbon emissions limit that would require companies to install new equipment and possibly revamp operations; a carbon emissions-trading program; and a renewable energy initiative, already adopted by several states, that calls for a certain percentage of power supplies to come from wind or other alternative sources.
The expense of such steps gives some investors and politicians pause, said John Holdren, environmental studies professor at Harvard University. "The real consequences are far away," Holdren said. "The cost of doing something is immediate. There's a strong temptation to say 'wait and see."'
"Analysts are worried about the next 12 hours; climate change is way too long-term for them," said William Andrews, who manages about $4.5 billion at C.S. McKee & Co. in Pittsburgh, including Chevron shares.
Even before Katrina, Goldman's chief investment strategist, Abby Joseph Cohen, was signaling a shift on Wall Street. "Environmental issues, in particular climate change, are receiving increased focus from the investment community," Cohen said in an Aug. 26 report to clients.
Responding to pressure from pension funds and other investors, companies are factoring climate change into the risks and opportunities faced by their businesses, according to the Carbon Disclosure Project, a group of 155 institutional investors who oversee $21 trillion.
The group includes the California Public Employees' Retirement System, which is talking to the U.S. Securities and Exchange Commission about requiring companies to disclose their carbon-related risks, said Winston Hickox, portfolio manager for environmental initiatives and former head the California Environmental Protection Agency.
Hickox said it was "just a matter of time" before the White House catches up with states, companies and investors and "gets serious" about climate change.
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