Modern-day corporate and academic stances on climate change are essentially monolithic. A certain orthodoxy permeates the subject that often produces official stances that don’t align with what people actually think. Falsehoods such as 97% of scientists agree that climate change is caused by humans are accepted without question, and any company executive brazen enough to doubt the severity and claims of The Church of Climate Change is effectively submitting his resignation. But actions speak louder than words, and when you disentangle corporate rhetoric from financial bottom lines, it’s clear companies are just talking the climate change talk.
Anonymous corporate feedback on climate-related effects and costs is a good place to begin finding sincerity. The Carbon Disclosure Project conducted research that did exactly that to learn how businesses are preparing for unstoppable changes to the world. They surveyed 6,707 global companies and found that 53% identified climate risks with potential to harm their business — 44% reported no climate-related risks.
The geographic disparity of expected exposure was fairly pronounced: Less than half of companies in the United States (46%), Mexico (35%), Brazil (30%), Argentina (18%), Thailand (45%), and Chile (32%) reported concerns, with only small majorities of European (58%), Russian (51%), and Japanese (57%) companies. Interestingly, at least 75% of Turkish, Korean, Indonesian, and South African companies identified climate-change-related concerns.
Of particular intrigue is how companies viewed their climate-related risks versus opportunities. About half of that same 6,707-company cohort detailed potential climate opportunities for their businesses, with a material risk/opportunity differences present in the world’s 500 largest corporations. Two-hundred-and-fifteen of those 500 corporations anticipated approximately $970 billion of exposure, with varying degrees of likelihood. Surprisingly, U.S.-based companies only accounted for $110 billion (~10%) of that total, which is noteworthy as they represent the largest nationality in the group. However, 225 of the 500 corporations identified climate-related opportunities of over $2.1 trillion: an over 2:1 opportunity-to-risk ratio. U.S companies reported $450 billion of that total, an over 4:1 opportunity-to-risk ratio.
This is a somewhat ambivalent overall assessment. There are broad degrees of confidence for companies that did forecast vulnerability, with roughly half of the companies in the world’s most advanced economies not identifying any risks to their businesses. This isn’t to be taken dismissively, but it certainly isn’t the degree of certitude you’d expect in the face of apparent scientific consensus of our trajectory. When allowed to speak candidly and free of backlash, they’re fairly split, and of the net, belief there are more opportunities than risks.
What companies explicitly share with their shareholders is a telling and legally substantive matter. Financial disclosures are regulator-overseen corporate communications that provide investors information regarding operations that affect their business. A comprehensive study published in the Nature Climate Change journal gives exceptional insight into the guidance companies provide when investor dollars are on the line, and a regulatory body is monitoring the content.
The study conducted an analysis of 1,630 company corporate disclosures (many of them multinational with global operations) and their estimated fiscal expectations from climate change. In doing so, they found, “Most global estimates predict that the price tag of climate change will run into the trillions of dollars in terms of its negative effect on manageable assets. In contrast, our analysis finds that the aggregate financial risk reported through corporate disclosures runs only in the tens of billions, a discrepancy of at least two orders of magnitude.” The study is quick to attribute the massive chasm of corporate financial calculus versus academic projections ranging from $4.2 trillion to $43 trillion to ignorance, a lack of preparation, and not truly appreciating the cataclysmic scenarios they paint in their models.
To provide some insight into how these numbers are so stratospherically far apart, corporations try to measure tangible asset and operational risks — such as raw-material pricing, moving supply chains, facility-shutdown costs, and insurance premiums. These academic studies incorporate prognostications bordering on charlatanry, such as climate change, causing the consumption of all goods and services to fall by 20% and average incomes declining by 23% by the year 2100. Stated differently: that’s a specific global income and aggregate demand prediction over 80 years into the future, predicated upon assumptions regarding the most multivariate problem mankind has ever encountered.
Keep in mind there are zero people who can tell you what interest rates will be next year. The credibility of such intellectually self-indulgent prophecies should be obvious.
These are organizations with the most at stake and access to the best climatology human capital in the world to prepare for this purportedly inescapable Armageddon. In the disclosures, they provide (overseen by rigid regulatory bodies and subject to lawsuits and penalization for misinformation), the ramifications they forecast range from about 0.2% – 2% of academic models. There is a disconnect here.
It’s important to take the science behind our environment seriously, and it behooves us all to have businesses behave in a responsible way while delivering the value that we demand. But weaponizing adolescents and protesters, waving placards to shame others into submission to advance alarmist policies of control doesn’t produce this. Woke capitalism doesn’t have tolerance for much in the way of counter views, and corporations are too spineless to explicitly contradict the climate-change narrative.
Thankfully, honest feedback from the most resource-rich and exposed organizations in the world doesn’t seem to be quite as negative as presumed.
Jason Orestes (@JasonOrestes) is a former Wall Street financial analyst who focuses on contemporary political developments affecting economics, markets, and culture. His financial commentary can be found on Jim Cramer’s TheStreet, where he is a regular contributor, as well as Seeking Alpha.
