There is a clamor of voices demanding the rebooting of capitalism, from academics (such as Michael Porter) and politicians (like Al Gore) to investors (such as CalPERS) and Occupy's street activists.
The common thread is that today's model of capitalism overemphasizes short-term financial data and neglects information that gets at the true sources of sustainable value creation — things like innovation, brand equity, customer loyalty, and key stakeholder relationships. Corporate reporting today emphasizes compliance, boilerplate and legalese. As a result, we have a massive glut of filings, press releases, analyst reports and articles focused on financial data. The system has lost sight of the point of reporting: to give companies access to financial capital by communicating their value to investors.
The consequence of the systemic failure of this lopsided model is that companies focus on short-term financial performance — because that is what they believe investors are interested in — to the detriment of long-term value creation. Investors, meanwhile, compensate for the lack of knowledge about issues central to longer term value by pricing in a risk premium. This can result in market valuations that do not reflect the fundamental performance or prospects of the business, leading to a misallocation of capital and reduced visibility for investors, reinforcing short-term decision-making. And it is business that pays the price through more expensive capital, while furthering a flawed model of capitalism.
Fortunately, there is a better way to communicate about the sources of value creation: integrated reporting. Such reporting integrates material information about a firm's financial performance with information on sustainability performance and intangibles such as intellectual and human capital.
The global energy picture has rarely been more dynamic than it is today. The United States in just a few years has become an energy superpower, as it begins to exploit enormous shale and deep water fossil fuel reserves. The price of silicon dropped 80 percent between 2008 and 2012. More than two dozen bankruptcies of wind and solar companies is expected to spur a tripling of investment in renewables by 2030. Scientists watch warily as extreme weather events become the new normal, even as global average temperatures seem temporarily plateaued at historic highs.Read more »
Bloomberg BNA -- The University of Notre Dame is taking the reins of an index designed to help investors decide which countries are ideal for climate adaptation projects, the university said.
The index identifies countries where investment in climate change adaptation is most needed due to vulnerability to climate change impacts, and then measures readiness to absorb investment funds and apply them effectively to increase resilience.Read more »
Bloomberg BNA -- The environmental impact of doing business costs the global economy $4.7 trillion a year, according to a report released April 15 .
That figure includes the top 100 environmental impacts, such as air pollution-related health costs, the effects of greenhouse gas emissions, the loss of nature-based benefits such as carbon storage by forests, and loss of natural resources.Read more »
Sustainability initiatives assuage the conscience of executives and honor the appeals of NGOs. It's no wonder that feel-good business improvements are plentiful in most large companies.
The trouble is, as these programs mature, managers are finding that the easiest projects have already been identified. What's more, first-generation initiatives might not address unsustainable practices at the core of a business. A financial institution can reduce its carbon emissions by renting space in a green building, for example, or encourage employees to recycle, or compost cafeteria leftovers, but it's all still irrelevant to the managing market risk faced by investors.Read more »
Bloomberg New Energy Finance -- Water is a bigger concern than energy for the longevity of Las Vegas as a tourist destination and place to live, according to Tom Perrigo, sustainability officer for the city.
“We have more control over energy,” he said. “It’s obviously a big concern, but we’re an optimal region of the world for solar power. We have some fairly good wind resources and lot of geothermal resources in the state. Water, though, we only have so much control over.”
The southwest of the U.S. has suffered recurring droughts since the beginning of this century and resources from its main water source, the Colorado River, are declining.
President Obama's proposed fiscal year 2014 budget includes funding to help U.S. communities increase their resilience to extreme weather and other climate change impacts.
The budget proposal also includes nearly $1 billion to address climate change on a global scale by reducing deforestation and promoting low-carbon growth in developing countries.Read more »
Here's a puzzle: How can a virtual currency, existing in digital form on computer hard drives, demand real power and real fuel, and have real-world environmental costs? If you're struggling to think of an answer, welcome to the world of "Bitcoin mining."
As a lot of folks know now, thanks to all-hands-on-deck media saturation, Bitcoin is a medium of transaction created in 2009 by an anonymous programmer to facilitate anonymous digital transactions (there’s an excellent history here). In the recent speculative mania, the value of Bitcoins skyrocketed. Before Bitcoins can be traded, though, they need to be created.Read more »
Cross-posted from Bloomberg.com's Political Capital blog.
North Korea’s threat to wage war was the No. 1 topic today when senators quizzed the head of the U.S. Pacific Command. Still, Sen. James Inhofe wouldn’t let the morning pass without a chance to attack those who think human activity is warming the planet.Read more »
Too much valuable methane from natural gas is leaking into the atmosphere, hurting the bottom line as well as the climate. We know how to stop it. It’s cheap to do, and it can pay for itself.
Natural gas production in the United States has been booming—and is expected to keep growing. Already, there are more than 500,000 wells and 300,000 miles of pipeline in place. In 2012, U.S. producers brought more than 25 trillion cubic feet of natural gas to market. And, by 2020, the United States is projected to be a net exporter of natural gas.
Natural gas is here to stay. Its low price is spurring investment and jobs, and increasing energy security. But it’s important to get it right.
Much of the growth is driven by hydraulic fracturing -- or “fracking” -- a process in which producers can drill more than one mile down and one mile across to access gas in rock formations. While shale gas has been an economic boon, the process can contaminate water supplies, cause air pollution, and have other disruptive impacts on the land and communities.
Without methane leakage, natural gas would create only about half the greenhouse gases per unit of energy as coal. Yet, methane is 72 times more potent than CO2 measured over 20 years, which is particularly important given that climate change is happening even more quickly than many models have predicted. (Methane has around 25 times more warming potential than CO2 over a 100 year timeframe.) At around three percent leakage, natural gas becomes more harmful than coal in the near term.
WRI recently conducted an analysis to find out what we know about U.S. methane emissions from natural gas and what can be done to rein them in.Read more »