Climate change not factored into companies' value, warns UN chief

Carbon finance experts told firms with high-carbon emissions must be re-evaluated by stock markets
Fiona Harvey guardian.co.uk 10 Oct 11;

Companies around the world are being valued incorrectly by world stock markets, because the cost of their exposure to climate change is not being factored in, the United Nations' climate chief has warned.

"As long as these companies [that emit large quantities of greenhouse gases] have a high value, we are giving out the wrong signals," said Christiana Figueres, executive secretary of the UN framework convention on climate change, told an audience of carbon finance specialists in London. "It has got to be that those companies that are investing in the technologies of the future are recognised."

She called for "an active valuation" of companies with high carbon emissions, saying the world was "far behind" in doing so. "How is it possible that the valuation is not keeping pace?"

Companies should take note, she urged, of the political reality that governments around the world have signed up to a commitment of holding global temperature rises to no more than 2C above pre-industrial levels, which scientists regard as the limit of safety beyond which climate change becomes unstoppable and catastrophic.

If businesses were to pay attention to the political commitment that countries signed up to in Copenhagen in 2009 and last year in Cancun, they would behave differently, she suggested. "We are moving to a low-carbon future – businesses need to understand that signal. This is a megatrend."

The implications of governments' commitments would be that in 20 years' time, for every tonne of carbon dioxide emitted, businesses will need to extract five times the economic value that they do today, she said – in other words, companies must do as much as they currently do while producing a fifth of the carbon emissions.

But the private sector had been slow to take up the message to invest in low-carbon infrastructure because companies complained that governments were not creating the right environment for them to do so. "We are in this unfortunate vicious cycle where businesses are saying they need a signal, [such as a carbon] price, and governments are saying you need to give us the political space to do so," Figueres explained.

She called for both governments and businesses to unleash the investment needed for "a transformation of the economy".

The leading UK business grouping echoed this call. Neil Bentley, deputy director-general of the CBI, said companies were willing to make the investments required for greener economic growth, but that they were frustrated by the stance of politicians. He called for ministers to stop sending out contradictory signals on their commitment to tackling climate change, and to unequivocally back emissions-reduction policies that would spur business investment.

Figueres was speaking after UN-led climate talks in Panama last week ended inconclusively, with developing countries blaming the rich world for failing to go far enough in emissions reduction and in providing finance to help poor countries on the path to greener growth. Most developed countries outside the European Union are reluctant to agree to extend the Kyoto protocol beyond 2012, when its current provisions expire, while developing countries are demanding they do so.

The issue is likely to be a serious sticking point at the next major round of climate talks, to take place in Durban, South Africa, this December.