From fad to fixture: how investors are waking up to climate risk
Monday, February 1, 2016
The U.S. EPA’s accusation last fall that Volkswagen AG had cheated on emissions tests sparked a fire sale in global markets. Sellers pushed the company’s stock down 30 percent in just four days.
After New York Attorney General Eric Schneiderman (R) announced that coal company Peabody Energy Corp. had for years deceived investors by downplaying the threat that climate change and climate regulations posed to its business, Peabody shares dropped 10 percent in two days.
And Exxon Mobil Corp. shares dipped when the public learned on Nov. 5 that Schneiderman, probing to determine if Exxon lied about climate risks to its operations, had subpoenaed the oil giant. The same saga played out when news broke Jan. 20 that California Attorney General Kamala Harris (D) is also investigating Exxon for covering up what the company knew about climate change: The stock fell 5 percent in a single session before recovering.
Historically, investors haven’t worried about how climate change or greenhouse gas-cutting laws might affect their ledgers. But as a growing number of money managers, Wall Street traders and regulators agonize over climate change costs, that stance has shifted from apathetic to alert.
“Environmental and social scandals are showing up in stock price crashes,” said Verity Chegar, an analyst at BlackRock Inc., which manages $4.6 trillion.