Investors tell CEOs: 'Cut your carbon, or risk losing trillions'

Big investors know that money talks … and a group of nearly 100 investors with deep pockets hopes it can use money power to send a message to companies that could do more to cut their carbon emissions.

It’s not just a matter of taking action to minimize climate change. The 92 institutional investors with a net worth of $10 trillion that have signed on to the Carbon Disclosure Project’s Carbon Action program also worry that companies that aren’t committed to curbing greenhouse gas emissions are taking needless financial risks.

European businesses, for example, could take a hit from rising carbon prices imposed under the EU’s emissions trading scheme.

That’s why investors backing the Carbon Action program have added their names to letters sent to CEOs of 415 of the world’s largest public companies. The letters ask for different actions depending upon each company’s circumstances, but in general are looking for signs of a commitment to cut carbon emissions and improve sustainability.

“(W)e believe that the external costs of greenhouse gas emissions will become internalized into company cash flows and profitability,” said Paul Abberley, CEO of Aviva Investors London, a founding signatory to the Carbon Action initiative that was launched in 2011. “Managing greenhouse gas emissions is therefore essential to delivering sustainable shareholder returns. There still remains huge potential in companies for achieving cost-effective emissions reductions …”

The Carbon Disclosure Project isn’t naming names just yet, but the companies whose CEOs are receiving letters include those in sectors with typically high carbon emissions — an average of 4 million tonnes per year: oil and gas companies, electric utilities, airlines, freight companies, mining companies and more. Letters also went out to companies with the potential to cut emissions across large supply chains: retailers, internet and catalog sellers, food and beverage firms, electronics and computer businesses, and so on.

If CEOs on the receiving end are agreeable, the Carbon Action project will have achieved its objective. If not? Their responses will be made available to the 92 investors backing the initiative, who can then pursue what the Carbon Disclosure Project calls “engagement activities.”

“Some investors,” the Carbon Disclosure Project adds, “may want to extend beyond engagement on the basis of the responses over time, to voting against companies who don’t comply and potentially to divestment.”

In other words, “Nice multinational energy company you got there. Be a shame if something happened to it … like our deciding to take our money somewhere else.”