News November 2000 US firms 'infringing SEC rules' on environmental disclosure US companies are systematically failing to disclose significant environmental risks to investors - in breach of Securities and Exchange Commission (SEC) rules - according to the World Resources Institute (WRI), a leading US think-tank. And the SEC is failing to bring firms to book for these infringements, the WRI says in a report* published last month. WRI researchers looked at the 1998 and 1999 financial statements of 13 US pulp and paper companies and found that "few companies adequately disclosed the financial risks or potential competitive impacts arising from their exposures to known environmental uncertainties". *Coming clean: corporate disclosure of financially significant environmental risks www.wri.org/wri/ Innovest links smokestacks to stock prices A new service which aims to assess the potential impact of companies' greenhouse gas emissions on their share prices is being launched by Innovest Strategic Value Advisors. The discounted present value of potential carbon liabilities can represent as much as 40% of a company's market capitalisation, says the New York-based investment advisory firm. The new service - known as the Innovest Carbon Finance Practice - is based on what the company claims is probably the most comprehensive and sophisticated database of company-specific risks and opportunities arising from carbon emissions. Expected clients for the service include: investment banks; insurance companies; pension funds; and other strategic investors. BP sells its emissions expertise BP is offering its expertise in emissions management to other companies that are likely to participate in the UK market in greenhouse gas emission allowances. The new service could involve helping companies reduce their emissions, measuring and monitoring the savings and monetising any credits generated, says Paul Mason, sales and marketing director of the oil major's UK gas and power division. Minerals processing group Imerys, formerly known as English China Clay, is the first customer for the service. "We believe that by outsourcing our energy and emissions management to BP, we have the most cost-effective solution to meet our goals," says Tony Mitchell-Harris, Imerys' engineering and energy manager. Nigerian cash costs Credit Suisse sustainability ranking Sustainability Asset Management (SAM) has downgraded Credit Suisse Group's sustainability rating. This follows a reprimand from the bank's regulator concerning failures of internal controls relating to money transfers to the Swiss bank from two sons of ousted Nigerian dictator Sani Abacha. But a spokesman for Credit Suisse says he is "astonished" that SAM decided to downgrade the bank, given that the Swiss Federal Banking Commission did not rule that the bank needed to tighten its procedures The Commission has, however, ordered an independent in-depth audit of Credit Suisse's systems to ensure that the correct measures are being implemented. And SAM holds that, despite the improvements in Credit Suisse's procedures, it still lags behind some of its peers. Partnership to lay framework for more carbon trades Seven multinationals have announced a partnership to promote the development of carbon markets. The Partnership for Climate Action, which also involves Environmental Defense, a US non-governmental organisation, will set out to encourage emissions trades between member firms, by setting common standards for measuring and reporting greenhouse gas emissions reductions. "We will look at what each company is doing [to reduce emissions], see what best practice is, and apply the lessons learnt," says Sarah Wade, an economist at Washington-based Environmental Defense. "The end goal is to encourage inter-company transactions." Reclaim Nox prices to rise again? Prices of nitrogen oxide (NOx) credits in the Californian Reclaim market are likely to spike again around the year-end, specialists say, after soaring from around $1/pound to almost $50/pound in the first seven months. In late October, NOx Reclaim Trading Credits (RTCs) were again being offered for sale in the over-the-counter market at above $40, brokers say, after falling well below their July peak in August. On the Automated Credit Exchange, where RTCs can also be traded, a small quantity of this year's Cycle 2 credits were sold last month for $31. Reclaim (Regional Clean Air Incentives Market) is a cap and trade programme set up in 1993 to tackle smog in the Los Angeles area. It is a complex market involving two types of credits - Cycle 1 which expire at the end of December and Cycle 2 which expire at the end of June. Huge trades stir weather market Dynegy, one of the largest US energy marketers, made a splash in the weather derivatives markets last month with an aggressive hedging programme that marked its first sizeable weather deals. Brokers say that its entry - which coincided with the first significant business from French-based trading company Louis Dreyfus and from Hetco, the trading arm of oil major Amerada Hess - generated a wave of trading from other players. "Dynegy came in quickly and decisively," says Michael Scharfenberger, a weather broker at Boldwater Brokers in Houston. "I think they were substantially successful in achieving a large part of their objectives." He adds that the entry of these three firms made it easier for other dealers to hedge their own exposures - a positive development in a market that has often lacked liquidity in recent months. Aon Carbon broadens its reach Aon, the US-based insurance group, has expanded and renamed its Aon Carbon group reflecting a broader remit for the team. Now known as Aon Environmental Solutions (AES), it will offer risk management and risk transfer solutions across "the sustainability sector", says Justin Mundy, a director at the London-based group. It has also announced partnerships with US broker Natsource and consultancy PricewaterhouseCoopers. While climate change issues remain a key focus for AES, it will also look at providing broader sustainability-related risk management solutions, says Mundy, particularly in the water, waste and energy sectors. Lower risk SRI for UK investors NPI has launched the UK's first socially responsible with-profits fund. Independent financial advisers (IFAs) have welcomed the fund, aimed at retail investors, as the first socially responsible investment (SRI) that offers buyers lower-risk income. "I'm very positive about it," says Jeremy Newbegin, principal at the Ethical Partnership. "This will be attractive to those that have a lower risk [SRI] investment philosophy." UK announces new climate change measures The UK is to set up a Kyoto Mechanisms Office to encourage the export of low-carbon technologies, Prime Minister Tony Blair announced in a speech devoted to environmental issues last month. It will begin work next April, he said, the same month that the UK's pioneering national market in greenhouse gas emission allowances is due to begin. ICF offers web-based emissions control A new internet-based service to help companies manage their emissions to air has been launched by ICF Consulting. Three types of emissions will be covered: greenhouse gases (GHGs), sulphur dioxide and nitrogen oxides. "Linking emissions and emission reductions to impacts on financial value has become essential now that nascent markets for emission reduction credits have emerged," the company says. "For GHGs, most companies now anticipate a future need to operate within carbon-constrained scenarios, regardless of the fate of the Kyoto Protocol," says ICF vice president Abyd Karmali. Cold winter to bring balance to weather market? A return to normal winter temperatures is forecast for the United States this year - which promises a more balanced weather derivatives market, dealers say. On October 12, the US National Oceanic and Atmospheric Administration forecast average temperatures across the Northeast 4F lower than the previous three winters. Weather dealers say that forecasts since late September have pushed up the price of protection against a cold winter. But by the time of the latest forecast, most hedgers - companies looking to protect revenues against the effects of weather - already had contracts in place. Kendall Johnson, weather broker at Tradition Financial Services in Connecticut, says that these forecasts are impacting prices for the second half of the season Accounting standards board for carbon? Exploratory discussions were held New York in late September on the need for an independent body to set carbon accounting and certification rules. Representatives from a number of leading multinationals, consultancies, brokerage firms, and non-governmental organisations met to consider the type of institution that could best promote international standards in measuring carbon emissions reductions. "The meeting set out to consider whether there's a need for an independent institution, and, if so, how should it be established, structured, and what its parameters should be," says Tim Mealey, a partner at the Meridian Institute, a not-for-profit group which facilitates policy dialogue on sustainable development issues, and which organised the meeting. 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