Recently, Elm posted a piece discussing comments from Kevin Parker, the CEO of Deutsche Asset Management, an investment firm with three-fourths of US$1 trillion under management. We expanded that original post for EHS Journal, who just published it. The expanded … Continue reading →
For years, those of us in the environmental/sustainability profession have sought credible ways and metrics for quantifying the economic value of our efforts, activities and programs. A myriad of studies completed dating back to the late 1980s attempt to demonstrate “environmental value”. Most of these studies have shown rather tenuous linkages or used meaningless metrics. Interestingly, most of these studies link to equity markets – i.e., stock prices. Maybe because stock prices grab headlines, are tied to compensation or are the target to which Boards and senior executive generally manage. The problem is that environmental/sustainability matters don’t fit into this model, either because they tend not to be financially material, or they don’t develop economic certainty within the “current quarter” myopia of corporate management, financial markets and analysts. A recent article on the topic was published in The International News. The article includes an interview with Kevin Parker, CEO of Deutsche Asset Management (DeAM) on the subject of how capital markets currently view environmental/sustainability risks. DeAM manages over US$775 billion in assets. With simplicity, clarity and unquestionable credibility from the financial market viewpoint, Parker made key points in the article and interview: Bond markets are poised to punish polluting companies
Read more →Yesterday, the world’s largest retailer and its cadre of sustainability advisors released the 61-page Walmart Supplier GHG Innovation Program: Guidance Document. Elm has read through this document and provides a brief overview of what we think are several important points. What follows is a combination of excerpts from the document combined with Elm comments. Not all of these points are implementation “how-to’s”. Some of our comments reflect potential problems that should be evaluated by suppliers who are impacted by Walmart’s supplier sustainability initiatives. The program will initially focus on the following product categories: Animal feed, apparel, candy, cheese, frozen food, fruit, grains, household detergents, meat, media, milk, motor oil, pharmaceuticals, produce, sanitary paper products, snacks, soap & shampoo, soft drinks & beverages, televisions, and vegetables. GIVING CREDIT WHERE CREDIT IS DUE (TO WALMART) In past articles, Elm discussed our view there is a true business risk – rather than competitive advantage – to first-mover adoption of GHG reduction programs. We had anticipated that such risk would be rooted in regulatory requirements. While that may still be a concern in the longer term, it appears now that the more significant risk relates to Walmart suppliers. The retailer has specified that no
Read more →NYT reports that Washington has abandoned hope of issuing carbon legislation this year, including cap-and-trade. The inaction is also dragging down regional/state programs as well, including the well-hyped RGGI trading program. This shouldn’t come as a real surprise to anyone. But it does continue to increase the business uncertainty surrounding emissions in the US. Tune in again next year. Or the year after….
Read more →Our last entry discussed the concept of “Black Swan” events, a term created by noted author Nassim Nicholas Taleb to describe an event that is (a) so low in probablility that it is unforeseeable and (b) so catastrophic in impact that it changes history. Certainly, risk assessments are predictive in nature and no one can predict the future with complete certainty. But in our view, one of the best tools available for risk assessments is an open mind. This can be a challenge in the EHSS world as we generally have engineering and other technical backgrounds. We have been trained to seek absolutes and eliminate uncertainties. At Elm, we believe that involving external support helps to identify and explore events (and their related exposures) that are relevant but get “technically rationalized” by internal staff. With the BP oil spill and the December 2008 Kingston, Tennessee coal ash pond failure, we began thinking about some of the Black Swan events discussed with clients in the past. Below are a handful of EHSS Black Swan risk events that we have discussed with clients over the past years – and some that are currently on our mind. Radical change in EPA’s regulation of coal
Read more →Bloomberg.com reported that earlier this week, European authorities launched a major investigation of several large companies that are thought to have played a role in a system of fraud and tax evasion that may have impacted 7% of the total CO2 emissions trading market for 2009 in the EU. Prosecutors and tax investigators yesterday searched Deutsche Bank, HVB Group and RWE AG in a raid on 230 offices and homes to investigate 180 million euros ($238 million) of tax evasion. The probe targeted 150 suspects at 50 companies… Yesterday’s raids were the biggest related to a fraud that may have tainted an estimated 7 percent of European Union carbon trades in 2009… About 400 million metric tons of emission trades may have been fraudulent last year, or about 7 percent of the total market, including futures transactions, according to estimates from Bloomberg New Energy Finance. Europe lost about 5 billion euros in revenue for the 18 months ending in 2009 because of value-added tax fraud in the CO2 market, according to Europol, a European law-enforcement agency.
Read more →Last night (April 20, 2010), CNBC aired an hour-long TV segment on the burgeoning industry labeled “carbon hunting”, the practice of finding, aggregating, marketing and selling carbon credits. While the story illustrated successful projects, it also highlighted a myriad of risks in the carbon trading industry. Check your local TV listings for the next airing.
Read more →Reuters has reported that the US Senate anticipates bringing the latest carbon emission bill to the floor next week. Although details are currently sketchy, there are some interesting facets revealed in that article: - The bill’s greenhouse gas (GHG) reduction target is 17% by the year 2020; - The baseline year for this reduction is 2005; - Regional and state-specific GHG cap-and-trade programs would be eliminated and replaced by a federal program. - Cap-and-trade for electric power generators would begin in 2012; for manufacturing, the program would begin in 2016; - Domestic and international off-sets would be allowable - Transportation emissions reductions would be achieved through a motor fuel fee that would hopefully spur various forms of innovation, efficiency and reductions One glaring aspect of these few details is whether/how companies will get “early action credit” for their GHG reduction efforts achieved prior to this bill’s 2005 baseline year. Corporations that made major strides in GHG reductions between 2000 and 2005 may find themselves on the wrong end of the “80/20 rule”. Those who chose to wait for more certainty could be in an improved competitive situation by spending less money to harvest the “low hanging fruit” to hit the
Read more →Environmental Leader has reported that the Hungarian government sold 2 million previously used CERs, the market became tepid. Then when prices fell from more than 12 euro per credit to less than one euro, trading was suspended on two exchanges, Bluenext and Nord Pool. The NYT provided more details of the transaction, stating The credits appear to be part of massive blocks of CERs awarded to Eastern European states and Russia after the collapse of Soviet-era industry. This created a loophole used by Hungary to reintroduce used CERs back into the market… Carbon traders said countries like Hungary were exploiting the loophole to earn more money from the carbon trading system than they could by selling the credits that they had previously earned under the Kyoto system… The traders said at least one other E.U. member state had acted similarly earlier this year. The EU said they were “surprised and concerned” about the situation. BusinessWeek quoted others who expressed more urgency about the matter: “The supply and demand dynamics have been changed,” said Paul Kelly, chief executive officer of JPMorgan’s EcoSecurities unit. While the scope of the problem has yet to be determined, buyers are “questioning the authenticity” of what
Read more →Use of New Technology Tracks Public Perception of Companies’ Sustainability/Climate Programs In the Federal Register dated February 8, 2010 (75 Fed. Reg. 6290), The Securities and Exchange Commission (SEC) published its Interpretive Guidance on financial disclosure/reporting requirements as they apply to climate change matters, which is EFFECTIVE IMMEDIATELY. Among the specific risk factors that SEC highlighted in this Interpretive Guidance is the potential business risk associated public opinion/reputational risk. SEC stated: Another example of a potential indirect risk from climate change that would need to be considered for risk factor disclosure is the impact on a registrant’s reputation. Depending on the nature of a registrant’s business and its sensitivity to public opinion, a registrant may have to consider whether the public’s perception of any publicly available data relating to its greenhouse gas emissions could expose it to potential adverse consequences to its business operations or financial condition resulting from reputational damage. In response to this SEC mandate, The Elm Consulting Group International, LLC has partnered with Sentiment360, a global online monitoring company that delivers new media business intelligence SaaS solutions. With offices in the US, UK and the Philippines, Sentiment360 has a proven track record in collecting, analyzing, understanding and
Read more →
Follow Us!