<a href="http://www.greenlifestylemag.com.au/blogs/leon#">The Business of Green</a>

The Business of Green

Money matters in the green world, by Leon Gettler.

Low emission profits

Leons-blog

Credit: sxc.hu

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The Gillard government this week introduced legislation putting a price on carbon to enshrine Australia's international commitments to limit global warming and predictably, it’s been attacked by business.

The Australian Chamber of Commerce and Industry reckons it will put jobs at risk. Mind you, the ACCI didn’t say anything when BlueScope Steel, one of the fiercest critics of the government’s carbon plan, announced it was sacking thousands of workers and when Qantas CEO Alan Joyce revealed Qantas was shedding 1000 jobs.

The ACCI’s stance is totally political. It’s not based on business. It contradicts global findings that companies that take steps to lower emissions actually do better, both in terms of profits and share price performance.
According to a new survey from the Carbon Disclosure Project (CDP), the link between success in reporting emissions and profit is because these companies clearly disclose the potential investment implications of climate change. So they manage risk better. It found that companies implementing policies to reduce carbon emissions actually perform better on the stock market compared with those that don’t.

The 2011 Carbon Disclosure Leadership Index and the Carbon Performance Leadership Index examine the world’s biggest companies. Each year, company responses are reviewed, analysed and scored for the quality of disclosure and performance on actions taken to mitigate climate change. This results in a disclosure score and, where sufficient disclosure exists, a performance score. This year, 404 firms joined the project and 68 per cent of these have now embedded climate change into the centre of their business strategies, compared with 48 per cent in 2010, indicating a fast-moving, positive trend.

The results of the survey show that companies included in the CDLI in 2011 had a higher total return - interest, capital gains, dividends and distributions - from January 2005 to May 2011 than non-disclosing companies, outperforming them by 40 per cent over these six years and by over 60 per cent over the last three years. These results suggest that a carbon price is good for business because it will force companies to reduce emissions, and therefore outperform laggard competitors.

So why are Australian business leaders screaming? One suspects it’s because of those government handouts. The government has been generous with taxpayers' money in terms of trying to silence the minority in the steel industry and the aluminium industry. As a result, every other industry in Australia now realises that you can make a lot of money crying wolf. That explains their hard-line position, despite the facts showing that reducing emissions delivers better profits and share price performance. That means they’re letting down investors.