Global Climate Change: A Social Issue that all Responsible Investors Must Address A Case for Investment in Businesses Employing Strategic Energy Management Roger Ballentine President Green Strategies, Inc 1700 Connecticut Ave NW, #404 Washington, DC 20009 Green Strategies, Inc. SUMMARY OF POINTS 1. Climate Change is the Premier Environmental Issue of our Time 2. Fiduciaries Must Address this Issue – and the SRI Community Can Lead 3. Investors can Assess Climate Impact – and Value --by Analyzing a Company’s Strategic Energy Management Green Strategies, Inc. Green Strategies, Inc. The Problem of Climate Change Green Strategies, Inc. The Problem of Climate Change • 7 of the 10 hottest years on record have • • • occurred since 1990 The 1990s was the hottest decade in the last 1000 years Over the last century sea level rose 4”-8” Over the next century, sea level is likely to rise by two feet Green Strategies, Inc. The Problem of Climate Change • Latest estimates are for average temperature increase over the next hundred years of 3 to 10 degrees • Last ice age (when the Northeast was under 3,000 feet of ice) was 5 to 9 degrees cooler than today Green Strategies, Inc. The Evolution of the Issue: from Activists to the Board Room • No longer a “fringe” environmental issue • WEF called GCC the greatest challenge facing • business in the 21st century Increasing regulations worldwide – Industrialized world (sans U.S.) committed to Kyoto (multinationals must respond) Green Strategies, Inc. Climate Change as a Fiduciary Issue: the Drivers (CERES) • The Science is No Longer in Doubt • Political Consensus is Coming • The Link between Environmental and Financial • • Performance is more Clear Shareholders are Taking Notice Increasing Demand for Disclosure Green Strategies, Inc. Climate Change as a Fiduciary Issue: Risk (an Issue for All Investors) • Risk from Impacts • Risk from Mitigation Policies • Risk of boycotts, ability to attract and retain high • quality workforce Company’s Climate/Carbon exposure can threaten shareholder value by as much as 15% of Market Capitalization (Innovest) Green Strategies, Inc. Climate Change as an SRI Issue: Negative Screens . . . • Carbon Intensive Industries – (coal, e.g.) • Retrograde Lobbying Associations (GCC, e.g.) Not Enough Green Strategies, Inc. Climate Change as an SRI Issue: Sector Positives . . . • Renewable energy • Other “Clean” Energy • Efficient or other Clean transportation • technologies Other efficiency technologies An important piece Green Strategies, Inc. Climate Change as an SRI Issue: Indirect Positives . . . • Voluntary Measures: Benchmarking; Participation in progressive policy advocacy efforts; Voluntary reporting initiatives Important, but indirect and there is a potential for greenwashing Green Strategies, Inc. Energy Management: Direct Climate Impact and Fiduciary Implications • Energy management and use is a direct indicator of climate change impact – Could be a positive or negative screen • Energy management and use is an indicator of value – All fiduciaries could benefit from this info. Green Strategies, Inc. U.S. GHG Emissions by Sector 8% 5%1% 8% Electricity Generation Transportation 33% Industry Agriculture Residential 19% Commercial 26% Green Strategies, Inc. U.S. Territories Energy Efficiency is Key to Climate Efficient use of energy reduces the need for energy production, decreasing greenhouse gas emissions from power plants Green Strategies, Inc. Energy Efficiency is Key to Climate (cont’d) • The energy to run commercial buildings produces 16% of U.S. carbon emissions • If households in California replaced four regular bulbs with CFLs, it would be the equivalent of building 17 new medium sized power plants Green Strategies, Inc. Energy Efficiency Adds to Value • Increased productivity • Reduced costs • Decreased risk exposure • Improved corporate image Green Strategies, Inc. Energy Efficiency Saves Money • U.S. businesses waste $25 billion/year because of inefficient buildings • Investments in building EE can achieve a 35% to 50% reduction in energy consumption, with a 20% to 35% ROI, not counting productivity gains Green Strategies, Inc. Energy Efficiency Reduces Risk • Energy prices are volatile • New climate policies could penalize big energy • consumers Electricity supply is volatile (e.g. California) and market structure is uncertain Green Strategies, Inc. Conclusion: The SRI Community Must – and can – put Climate Change Front and Center Green Strategies, Inc.