This article is free, but to access more of our content, you can sign up for a no strings attached 28-day free trial here.
For some time, institutional investors have been clear that they want the companies they own to commit to a business model which is compatible with climate sustainability. So why have so few companies responded?
One reason is that, until recently, companies were able to declare profits as though climate change simply did not exist. They assumed that their newly discovered oil well could be valued as though the oil coming out of it will be sold at $80 a barrel through to 2050 and beyond. They valued a thermal power plant, or a fossil fuel engine factory, as though its future was indefinite and unchallenged by climate concerns. Indeed, in most cases they didn’t even tell their investors what climate assumptions underpinned the company’s profits – and the bonuses they paid their executives.
These practices need to stop …