Climate change hitting shareholders

Climate change hitting shareholders

Investors are increasingly worried their financial interests will get crushed under the weight of a collapsing glacier.

Last week, lawyers for Exxon Mobil and New York State wrapped up their closing arguments in a closely watched trial over whether the company misled investors about the risks of climate change regulation on its business.

Exxon is accused of knowingly downplaying the cost of future climate change regulations in disclosures to shareholders. This caused investors to lose anywhere from $476 million to $1.6 billion, as per New York State’s attorney general.

“The case is almost a joke,” Exxon’s lawyer Theodore Wells said, arguing that all of the numbers Exxon disclosed were appropriate. Last week, Rex Tillerson, the former US Secretary of State and former Exxon CEO, defended the company in a public testimony.

Exxon’s official position on climate change is as follows: “We believe that climate change risks warrant action.” The company also officially supports the Paris climate accord, which the US formally began withdrawing from this week.

Nevertheless, the case shows that companies, especially ones in the business of fossil fuels, are under heightened pressure from investors to adequately prepare for and disclose the risks of climate change to their bottom lines.

Maybe the US’s central bank can help. Last Friday, the San Francisco Fed hold its first-ever conference on the economics of climate change. The questions that need to be answered, according to the conclusions they arrived at, are as follows:

· How do you quantify the economic costs of climate change?

· How will climate change affect financial asset prices?

· What are the implications for monetary, supervisory, and trade policy?

 

So, basically, it shouldn’t take longer than a half hour.

The reality is that we are in uncharted territory. The Fed’s responsibility is to stabilize prices and hit maximum employment levels—not keep carbon dioxide levels below 450 ppm. But as we’re seeing with Exxon, climate change is already impacting on companies and markets. In short, the Fed can’t just sit this one out.

2019-11-15T17:12:11+00:00

About the Author:

John Bärr
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