Realist, not conformist analysis of the latest financial, business and political news

It’s Drivel To Claim Climate Change Is The Biggest Risk To Corporations

One of the things which so annoys about climate change is the continual insistence upon things which simply are not true – like this claim that global warming is the major risk to large corporates. Nonsense, that’s simply drivel. The largest risk is what it always has been and hopefully always will be. Market competition from others driving the current incumbents out of business.

But, you know, here’s the claim:

“Climate change has got to be one of the top risks to companies, particularly the majors,” says Adam Matthews of the Church of England. “If they are not engaging with this subject at a strategic level as an existential threat to their operations, then I think they’re failing in their duties.”

The softly spoken Matthews, bearded and burly, has become the figurehead of a campaign group representing funds with $10 trillion (£8.2 trillion) under management. The Transition Pathway Initiative (TPI), launched in 2017, aims to measure companies on their green credentials and their planning for the future.

So, think about how long it’s going to be before climate change is a significant problem. Even the IPCC itself think it will be net beneficial until 2070. Hmm, well, maybe some companies are planning for that sort of time scale. But the gorbal worming thing shouldn’t be high on their list of worries all the same:

The disruptive force of technology is killing off older companies earlier and at a much faster rate than decades ago, squeezing employees, investors and other stakeholders, according to a new report.

“The average age of a company listed on the S&P 500 has fallen from almost 60 years old in the 1950s to less than 20 years currently,” a team of Credit Suisse analysts led by Eugene Klerk wrote in a note to investors Thursday.

Companies just don’t live very long lives these days. This is, of course, a good thing, for it means that we’ve vibrant creative destruction going on. But it’s also true that if that reasonable time horizon is a couple of decades then worrying about what’s going to happen in a few centuries when Greenland melts isn’t a great use of executive time.

Sure, you can dismiss this as just a little bit of snark but it’s really rather more important than that. What’s the central economic point in the Stern Review? That market time horizons are shorter than societal or environmental. That’s why we’ve all that arguing about discount rates – why we cannot use market interest rates to decide upon things in the far future. So, companies live by market interest rates. No, really, they do, for market interest rates are defined as being those that companies have to live by.

So, what we’ve got here is some loon insisting that companies must consider the far future and climate change as a risk when our entire problem with climate change is that companies shouldn’t be considering that far future. And people call denialists confused and unscientific?

Sure, maybe climate change will kill us all. But all the companies are going to be dead by then anyway which is why climate change isn’t a risk to them.

0 0 votes
Article Rating
Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x