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Global investors launch guide to drive engagement on climate risk with the mining sector

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A fortnight before the UN Climate Summit in Paris, and as the OECD deliberates whether to cut subsidies to the coal sector, a global network of more than 270 institutional investors (representing assets worth over €20 trillion) is publishing a guide to drive closer engagement with mining companies around the world about their management of climate risk.

Launching Investor Expectations of Mining Companies – Drilling Deeper into Carbon Asset Risk, Stephanie Pfeifer, Chief Executive at the Institutional Investors Group on Climate Change said today, “As momentum builds towards an international climate deal in Paris, the global investor community is setting out as clearly as possible the expectations it has for mining companies about action required to curb carbon asset risk. The guide has been developed to help investors step up their engagement with the mining sector as part of their ongoing efforts to better manage climate risk across their portfolios.”

Commenting further, Stephanie Maier, Head of Responsible Investment Strategy & Research at Aviva Investors, explains: “With mining companies featuring in many portfolios, investors need to know that these companies are prepared for the likely changing market dynamics arising from policies and actions to curb climate change and the risks they pose to profits.

“To protect their long term interests, investors want assurances that the capital allocation decisions made by the boards of major mining companies give clear consideration to climate change, and to the associated energy transition, in ways that will ensure the future sustainability and profitability of the entire sector.”

The guide is designed to support a constructive dialogue between investors and the mining companies they own about these issues. Bruce Duguid, Associate Director, Hermes EOS, and lead author of the guide added: “Climate change poses clear long-term risks to the current business models of many mining companies, as well as some opportunities. This guide is intended to develop market best practice for investor engagement with mining companies to ensure that decisions are made in the long term interests of shareholders and their beneficiaries”.

North American investors share that concern. Speaking about the guide, Andrew Logan, Director of the Carbon Asset Risk program at Ceres said, ”Going forward, asset owners and fund managers need to know how mining companies – and particularly the boards accountable for overseeing them – see the future of demand, how those views align with the carbon reductions required to deliver binding international agreements reached between governments around the world, and to what extent there may be stranded assets due to those commitments or a shift in demand.”

The guide warns that routine assumptions that underpin many of the demand and price projections used in the mining industry are now open to challenge due to the impact that transition to a low carbon economy (and associated policy changes) will have on patterns of demand, commodity prices, and use of technology.

“Investors recognise that the global economy is now pivoting around the need to limit global warming to two degrees. Diversified mining companies have already begun to shift away from carbon intensive thermal coal and look at the potential for new technologies to achieve net zero carbon operations. The publication of this guide is an important example of the market working to respond to climate change by driving thorough scenario testing, risk analysis and transparency from mining companies,” added Emma Herd, Chief Executive of IGCC Australia and New Zealand.

About the guide

Investor Expectations of Mining Companies – digging deeper into carbon asset risk was developed by the Institutional Investors Group on Climate Change (IIGCC) with support from investor networks in North America (Ceres’ INCR), Australia (IGCC) and South East Asia (AIGCC). It is intended to be used in tandem with Institutional investors’ expectations of corporate climate risk management

The guide is the first in the series of Investor Expectations guides to also have CDP data points linked to the questions to support investor preparation to meetings with companies. Welcoming the guide James Hulse, Head of Investor Initiatives at CDP added:

“CDP is delighted to have worked closely with IIGCC to link the expectations set out in the mining sector guide to the questions in the annual information request we send companies on behalf of 822 investors representing US$95 trillion. This, and our wider analytical tools and reports, support investors working together globally under the Carbon Asset Risk initiative.”

Whilst primarily aimed at diversified mining companies, the guide can equally be applied to any single commodity and therefore be used to inform engagement with companies focused on particular commodity groups such as thermal coal, precious metals, copper or rare earth metals.

The guide sets out investor expectations in reference to six areas of concern:

– Governance – Clearly define board and management governance of climate change risks and implications of energy transition dynamics.

– Operational efficiency (and emissions) – Set long term targets to improve energy efficiency, reduce carbon intensity and curb greenhouse gas emissions from all parts of the business and measure progress

– Strategy implementation – Ensure business model is robust and resilient in the face of a range of energy demand scenarios through appropriate stress testing

– Preparedness for physical impact of climate change – Appraise risks arising from ongoing changes to climate or local weather and put in place plans to preserve productivity and asset values.

– Public policy: Engage with policy makers and other stakeholders in support of cost-effective measures to mitigate climate risks and support low carbon investments. Do not lobby against these positions. Render all lobbying activity / spending on climate and related energy and regulatory issues transparent.

– Transparency and disclosure. Disclose in annual reports and financial filings, the company’s view of and response to each question set out in the guide.

Environment

These 5 Green Office Mistakes Are Costing You Money

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eco-friendly green offices
Shutterstock Licensed Photo - By Stokkete | https://www.shutterstock.com/g/cyano

The sudden interest in green business is very encouraging. According to recent reports, 42% of all companies have rated sustainability as an important element of their business. Unfortunately, the focus on sustainability will only last if companies can find ways to use it to boost their ROI.

Many businesses get so caught up in being socially conscious that they hope the financial aspect of it takes care of itself. The good news is that there are plenty of ways to go green and boost your net income at the same time.

Here are some important mistakes that you will want to avoid.

Only implementing sustainability on micro-scale

The biggest reason that brands are going green is to improve their optics with their customers. Too many businesses are making very minor changes, such as processing paperwork online and calling themselves green.

Customers have become wary of these types of companies. If you want to earn their business, you are going to need to go all the way. Bring in a green business consultant and make every feasible change to demonstrate that you are a green organization from top to bottom.

Not prioritizing investments by long-term ROI

It isn’t realistic to build an entirely green organization overnight. You will need to allocate your capital wisely.

Before investing in any green assets or services, you should always conduct a long-term cost benefit analysis. The initial investment for some green services may be over $20,000. If they don’t shave your cost by at least $3,000 a year, they probably aren’t worth the investment.

Determine which green investments will have the best pay off over the next 10 years. Make these investments before anything else. Then compare your options within each of those categories.

Implementing green changes without a plan

Effective, long-term planning is the key to business success. This principle needs to be applied to green organizations as well.

Before implementing a green strategy, you must answer the following questions:

  • How will I communicate my green business philosophy to my customers?
  • How will running a green business affect my revenue stream?
  • How will adopting green business strategies change my monthly expenses? Will they increase or decrease them?
  • How will my company finance green upgrades and other investments?

The biggest mistake that too many green businesses make is being overly optimistic with these forecasts. Take the time to collect objective data and make your decisions accordingly. This will help you run a much more profitable green business.

Not considering the benefits of green printing

Too many companies believe that going paperless is the only way to run a green organization. Unfortunately, going 100% paperless it’s not feasible for most companies.

Rather than aim for an unrealistic goal, consider the option of using a more environmentally friendly printer. It won’t be perfect, but it will be better than the alternative.

According to experts from Doranix, environmental printers have several benefits:

  • They can process paper that has been completely recycled.
  • They consume less energy than traditional printers.
  • They use ink that is more environmentally friendly.

You want to take a look at different green printers and compare them. You’ll find that some will meet your needs as a green business.

Poorly communicating your green business strategy to customers

Brand positioning doesn’t happen on its own. If you want to run a successful green business, you must communicate your message to customers as clearly as possible. You must also avoid the appearance that you are patronizing them.

The best approach is to be clear when you were first making the change. I’ll make an announcement about your company‘s commitment to sustainability.

You also want to reinforce this message overtime by using green labels on all of your products. You don’t have to be blatant with your messaging at this stage. Simply provide a small, daily reminder on your products and invoices.

Finally, it is a good idea to participate in green business seminars and other events. If your community has a local Green Chamber of Commerce, you should consider joining as well.

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Editors Choice

2017 Was the Most Expensive Year Ever for U.S. Natural Disaster Damage

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Natural Disaster Damage
Shutterstock / By Droidworker | https://www.shutterstock.com/g/droidworker

Devastating natural disasters dominated last year’s headlines and made many wonder how the affected areas could ever recover. According to data from the U.S. National Oceanic and Atmospheric Administration (NOAA), the storms and other weather events that caused the destruction were extremely costly.

Specifically, the natural disasters recorded last year caused so much damage that the associated losses made 2017 the most expensive year on record in the 38-year history of keeping such data. The following are several reasons that 2017 made headlines for this notorious distinction.

Over a Dozen Events With Losses Totalling More Than $1 Billion Each

The NOAA reports that in total, the recorded losses equaled $306 billion, which is $90 billion more than the amount associated with 2005, the previous record holder. One of the primary reasons the dollar amount climbed so high last year is that 16 individual events cost more than $1 billion each.

Global Warming Contributed to Hurricane Harvey

Hurricane Harvey, one of two Category-4 hurricanes that made landfall in 2017, was a particularly expensive natural disaster. Nearly 800,000 people needed assistance after the storm. Hurricane Harvey alone cost $125 billion, with some estimates even higher than that. So far, the only hurricane more expensive than Harvey was Katrina.

Before Hurricane Harvey hit, scientists speculated climate change could make it worse. They discussed how rising ocean temperatures make hurricanes more intense, and warmer atmospheres have higher amounts of water vapor, causing larger rainfall totals.

Since then, a new study published in “Environmental Research Letters” confirmed climate change was indeed a factor that gave Hurricane Harvey more power. It found environmental conditions associated with global warming made the storm more severe and increase the likelihood of similar events.

That same study also compared today’s storms with ones from 1900. It found that compared to those earlier weather phenomena, Hurricane Harvey’s rainfall was 15 percent more intense and three times as likely to happen now versus in 1900.

Warming oceans are one of the contributing factors. Specifically, the ocean’s surface temperature associated with the region where Hurricane Harvey quickly transformed from a tropical storm into a Category 4 hurricane has become about 1 degree Fahrenheit warmer over the past few decades.

Michael Mann, a climatologist from Penn State University, believes that due to a relationship known as the Clausius-Clapeyron equation, there was about 3-5 percent more moisture in the air, which caused more rain. To complicate matters even more, global warming made sea levels rise by more than 6 inches in the Houston area over the past few decades. Mann also believes global warming caused the stationery summer weather patterns that made Hurricane Harvey stop moving and saturate the area with rain. Mann clarifies although global warming didn’t cause Hurricane Harvey as a whole, it exacerbated several factors of the storm.

Also, statistics collected by the Environmental Protection Agency (EPA) from 1901-2015 found the precipitation levels in the contiguous 48 states had gone up by 0.17 inches per decade. The EPA notes the increase is expected because rainfall totals tend to go up as the Earth’s surface temperatures rise and additional evaporation occurs.

The EPA’s measurements about surface temperature indicate for the same timespan mentioned above for precipitation, the temperatures have gotten 0.14 Fahrenheit hotter per decade. Also, although the global surface temperature went up by 0.15 Fahrenheit during the same period, the temperature rise has been faster in the United States compared to the rest of the world since the 1970s.

Severe Storms Cause a Loss of Productivity

Many people don’t immediately think of one important factor when discussing the aftermath of natural disasters: the adverse impact on productivity. Businesses and members of the workforce in Houston, Miami and other cities hit by Hurricanes Harvey and Irma suffered losses that may total between $150-200 billion when both damage and sacrificed productivity are accounted for, according to estimates from Moody’s Analytics.

Some workers who decide to leave their homes before storms arrive delay returning after the immediate danger has passed. As a result of their absences, a labor-force shortage may occur. News sources posted stories highlighting that the Houston area might not have enough construction workers to handle necessary rebuilding efforts after Hurricane Harvey.

It’s not hard to imagine the impact heavy storms could have on business operations. However, companies that offer goods to help people prepare for hurricanes and similar disasters often find the market wants what they provide. While watching the paths of current storms, people tend to recall storms that took place years ago and see them as reminders to get prepared for what could happen.

Longer and More Disastrous Wildfires Require More Resources to Fight

The wildfires that ripped through millions of acres in the western region of the United States this year also made substantial contributions to the 2017 disaster-related expenses. The U.S. Forest Service, which is within the U.S. Department of Agriculture, reported 2017 as its costliest year ever and saw total expenditures exceeding $2 billion.

The agency anticipates the costs will grow, especially when they take past data into account. In 1995, the U.S. Forest Service spent 16 percent of its annual budget for wildfire-fighting costs, but in 2015, the amount ballooned to 52 percent. The sheer number of wildfires last year didn’t help matters either. Between January 1 and November 24 last year, 54,858 fires broke out.

2017: Among the Three Hottest Years Recorded

People cause the majority of wildfires, but climate change acts as another notable contributor. In addition to affecting hurricane intensity, rising temperatures help fires spread and make them harder to extinguish.

Data collected by the National Interagency Fire Center and published by the EPA highlighted a correlation between the largest wildfires and the warmest years on record. The extent of damage caused by wildfires has gotten worse since the 1980s, but became particularly severe starting in 2000 during a period characterized by some of the warmest years the U.S. ever recorded.

Things haven’t changed for the better, either. In mid-December of 2017, the World Meteorological Organization released a statement announcing the year would likely end as one of the three warmest years ever recorded. A notable finding since the group looks at global land and ocean temperature, not just statistics associated with the United States.

Not all the most financially impactful weather events in 2017 were hurricanes and wildfires. Some of the other issues that cost over $1 billion included a hailstorm in Colorado, tornados in several regions of the U.S. and substantial flooding throughout Missouri and Arkansas.

Although numerous factors gave these natural disasters momentum, scientists know climate change was a defining force — a reality that should worry just about everyone.

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