by Joseph F. Keefe
President and CEO, Pax World Management LLC
World leaders recently concluded the Copenhagen summit to chart a global strategy on climate change, and the U.S. Congress hopefully will soon take up cap-and-trade legislation to reduce carbon emissions here at home. Contrary to what some climate skeptics would have us believe, business leaders from across the globe and in our own country are actually supporting these efforts. The reason is simple: there is an urgent need to put a price on carbon so that markets and businesses can not only plan for, but profit from, the transition from an industrial age economy powered by coal and oil to a sustainable economy powered by clean energy and energy efficiency.
As world leaders gathered in Copenhagen, more than two-dozen major U.S. companies – including Dow Chemical, Microsoft, Nike, eBay, Sun Microsystems and Pacific Gas & Electric – sent a letter to President Obama encouraging him to secure a strong climate change agreement with significant emissions reduction targets and substantial new financing commitments from the United States and other developed nations.
Saying that “our environment and economy are at stake,” the letter calls for forceful leadership to achieve a global climate deal and accelerate investments in clean technology deployment, job creation and enhanced U.S. competitiveness. “We must put the United States on the path to significant emissions reductions, a stronger economy and a new position of leadership to stabilize our climate,” the letter states. “The costs of inaction far outweigh the costs of action.”
Copenhagen is now concluded but in the coming months we can expect to see leading members of the U.S. business community supporting the Obama administration and Congress in efforts to cap and reduce greenhouse gas emissions.
It is curious, therefore, that the U.S. Chamber of Commerce, which ostensibly represents the business community, has not only chosen to oppose climate change solutions but continues to advance the specious argument that we face a stark choice between the environment and the economy – that addressing climate change will somehow be bad for business and cost us jobs. The opposite is the case. I am afraid the Chamber is completely out of touch with contemporary business and economic realities.
My company, Pax World, manages approximately $2.4 billion in mutual fund assets. In recent years, we have joined with other institutional investors in efforts to engage publicly traded companies and regulatory authorities on the issue of climate change. In 2007, we were signatory to a petition to the Securities and Exchange Commission (SEC) requesting interpretive guidance on company reporting of climate risk. We also signed onto a request for SEC action to allow shareholder proposals requesting information about climate risks and other environmental and social issues.
More recently, we were a signatory to an international investor statement, released at the United Nations in mid-November, encouraging the world’s governments to reach a global agreement on climate change and reduced carbon emissions. We also recently signed onto a letter, sponsored by the Investor Network on Climate Risk, supporting the development of a new Northeast Low Carbon Fuel Standard. Eleven New England and Mid-Atlantic states have, through the Regional Greenhouse Gas Initiative (RGGI), entered into an agreement to define common principles of a Low Carbon Fuel Standard.
We participate in these initiatives, along with other institutional investors, for the very same reason that some of the nation’s largest electric power, manufacturing, technology and consumer-facing companies recently wrote to President Obama: because businesses, regulatory authorities and investors must be attentive to the financial risks as well as the tremendous financial opportunities associated with climate change solutions and the transition to more sustainable energy economy. Addressing climate change will be good for business and good for investors, whereas failure to do so poses dire financial and economic risks.
This is not to say there won’t be costs. There will be – for the very simple reason that today there is no price on carbon. There needs to be if we are going to encourage energy efficiency and clean energy technologies and usher in the next great era of economic growth. But the upfront costs of carbon mitigation will be far outweighed by the long-term economic and environmental benefits.
The Chamber of Commerce is dead wrong on climate change, and dead wrong on cap-and-trade legislation. The Chamber may speak for a small subset of the business community but it does not speak for the business community as a whole. Its agenda seems to be more of a political agenda than a business agenda. By contrast, many local chambers of commerce across the country, being more practical and less ideological, clearly understand the economics of addressing climate change and are hard at work on local strategies.
Putting a price on carbon and capping emissions will not only help avert the costs of a looming climate disaster but will make businesses more efficient and help catalyze a green technology revolution; it will benefit businesses, investors, consumers and the planet.
Joe Keefe is President and CEO of Pax World Management LLC, investment adviser to Pax World Funds, headquartered in Portsmouth, NH.