It is widely accepted that the causes of climate change are complex and diverse. At the same time, it seems that the mechanisms by which companies are held to account for their contribution to global warming are also proliferating. Alongside green taxes, carbon trading schemes and environmental legislation, business is now facing increasing pressure from the investment community.
In recent months, there has been a discernable shift in emphasis on the part of institutional investors. As several of these news reports suggest, corporate performance on climate change is rising in importance as it becomes a more material risk to business success.
This trend is compounded by the findings of a recent report from the UNEP Financial Initiative. The authors of this report argue that investment advisors and asset managers could be sued for negligence if they do not consider the environment and other social issues when making investment decisions. Apparently they have a legal responsibility to raise concerns about such aspects of corporate behaviour when offering investment advice to clients.
This raises the game for all companies, not simply those with a large or obvious environmental impact. There will be growing scrutiny of their environmental credentials and risk management systems by investment advisors. The increased threat of shareholder resolutions related to environmental performance cannot be dismissed. Each business needs to think carefully about its level of disclosure in this area if it is to avoid an embarrassing confrontation at the next AGM. The need to understand the full extent of your environmental impacts, and to report on these in an appropriate way, has never been more pressing.