The Financial Times recently quoted an investment Manager who criticised the usefulness of voluntary Carbon Emission disclosure by companies. Because I don not agree with this view, I am glad that the FT printed my letter (on Tuesday November 25) responding to this statement.
The text is as follows:
Carbon units and company value
Published: November 25 2008 02:00 | Last updated: November 25 2008 02:00
From Mr Patrick Niessen.
Sir, I was interested to read two contributions on the usefulness of carbon reporting in your November 17 edition. James Murdoch pleaded for a mandatory disclosure of greenhouse gas emissions (“Carbon disclosure should be mandatory by 2010”), and Rory Sullivan was quoted as criticising such disclosure for being irrelevant to investors (“SRI veteran questions ‘spurious’ data”).
Of course Mr Sullivan has a point: GHG emission estimates for a company can vary strongly depending on who prepares the data, which method of estimation is used and where organisational boundaries are drawn.
Voluntary disclosures of companies may tend to err on the side of self-interest, and critical examination and adjustment is required before the data can be used (corresponding to how most information provided by a company should be treated). On the other hand he is wrong on two counts.
First, even voluntary reporting can have comparison value: progress over time can be observed even with a bias (if the estimation method remains the same), and an approximate grasp of scale can be gained. Second, reporting standards do exist, and third parties are available to verify and certify these standards (admittedly they could be improved).
GHG figures may be poor indicators of future investment performance, but on the other hand they are good indicators of a company’s environmental performance and the sustainability of its business model. For instance, how many cars can each consumer own at the same time? Can car sales growth be sustained forever?
Carbon accounting will eventually have a strong impact on a company’s value, when legislation forces accurate measurement, introduces taxes on emissions and requires all agents in the economy to pay for their contribution to global warming in one way or another. I agree with Mr Murdoch that mandatory disclosure is necessary, but would go even further in that the entire life cycle of a product must be considered.
To take the guesswork out of the emission counting, perhaps we will one day see carbon units printed on our purchase receipts. At that time companies will need to treat such receipts with the same care as normal expense receipts, and keep them on file to allow detailed audits to confirm disclosures.
Patrick Niessen,
Tokyo, Japan
No comments:
Post a Comment