the absence of strong international action, climate change
will undermine markets, increase risk and make business
significantly more expensive in the medium and long term.
As investors we have recognized that governments
have a critical role to play in structuring markets in ways
that ensure their own long-term sustainability. A point
also convincingly demonstrated by the extraordinary
events in the financial markets over the last 12 months.
Clearly markets do not know best and regulators, working with the best science available, have to ensure that
environmental externalities are effectively priced into
markets.
This is a point that the wider business community increasingly recognizes. Henderson is also a signatory to the
so-called Copenhagen Communiqué that has been signed
by over 670 companies from
China, Mexico, India, South
Africa, the US and Europe.
This statement too, calls
for strong action on climate
change — underlining the
strength of support from
across the business community as a whole for regulatory
action on climate change.
For many business leaders
the urgency of the challenge
has helped tame their natural
instinct to reject regulation
on principle. This has been a
view that has been common in the U.S. as well as many
other countries, but as climate policy has emerged piecemeal — as it has for example in the U.S. with different
states taking their own distinct and often contradictory
initiatives — so business has been left with an expensive
and confusing patchwork of different regulatory regimes.
Equally, the continuing lack of certainty over future
U.S. federal action has also proved disabling for many
businesses. For many leaders the calculation is now to
push for federal action and international action as a way
of overcoming these issues and arriving at a more efficient
overall approach.
I should stress that I am no apologist for government
regulation. We recognize as well as any, the bureaucracy
and inefficiencies that regulation can introduce — often
generating unintended consequences that end up undermining the original ambition of the regulation. Our
clear preference is for government to set the framework
in which markets operate and then to stand back and allow private operators to make the market work. It is for
this reason that the investor statement on climate change
calls for the use of carbon markets as a principal response
(Continued from page 35)
to climate change — allowing market participants themselves to find the most efficient methods to deliver mandated carbon reductions.
We also believe as investors that markets work best
when information is freely available on which to make decisions about what investments to make and when to sell.
The voluntary nature of CSR reporting has long been
protested by the business community, but now that many
of the issues typically covered by CSR reports can clearly
be seen to have a material impact on business performance, so we believe these issues should be routinely
reported.
Here too, we believe that governments have an en-
abling role to play. Indeed a recent survey of London-
based investors found that over 86 percent “would wel-
come regulatory requirements on investee companies to
report greenhouse gas emis-
sions.” It is only when this
information is reported in a
standardized and comparable
format that investors can
make judgments on where to
invest their money.
While the appetite for government action on CSR issues
varies regionally, it is clear
that catalyzed by the issue
of climate change, more and
more companies are recognizing the importance of a government role in developing the
frameworks within which market actors can then best act.
It is perhaps a supreme irony that resisting regulation
is likely ultimately to lead to the least efficient command and control kind of response from government.
Far better, we would argue, to engage in contributing
and shaping a market-based system of regulation that
enables businesses to do what they do best — innovate
and compete.
Call this business responsibility if you like. I just call it
good business.
Seb Beloe is head of Socially Responsible Investing
(SRI) research at UK-based Henderson Global Investors. He joined the company in Nov. 2007 after nine
years as vice president of research and advocacy at
consulting company Sustainability. Beloe has a BSc
(Hons) in Environmental Science and an MSc DIC in
Environmental Technology from Imperial College, London and is a Chartered Member of the Institute of Environmental Management and Assessment. Established
in 1934, Henderson is one of Europe’s largest investment managers with an $84 billion asset portfolio. ACW
