Ethical Performance
inside intelligence for responsible business


Corporate bill reaches $2tn

January 2011

The world's largest 3000 companies caused about a third of all environmental damage attributed to human activity in 2008, the cost of which was estimated at $2.15trillion (£1.36tn, €1.62tn).

The calculations are from the United Nations Principles of Responsible Investment (UN PRI), which reports that the 2008 total global environmental costs are larger than the $5.4tn decline in the value of pension funds in developed countries caused by the global financial crisis.

The most damage is done by the utilities sector, put at about $400billion. Consumer goods are causing damage estimated at nearly $300bn, representing a particular drain on water resources.

The UN PRI estimates that global environmental damage will reach $28tn by 2050, warning that as damage and resource depletion increase - and governments perhaps begin to apply more vigorous regulations - the value of large portfolios will be reduced by higher company insurance premiums, taxes and clean-up costs.

The study recommends that investors 'exercise their ownership rights, collaborate to encourage companies and policymakers to reduce these environmental externalities, and request regular monitoring and reporting from investment managers on how they are addressing exposure to environmental risk'.

Paul Clements-Hunt, executive director of the UN Environment Programme Finance Initiative, said: 'This report sends a powerful message that the environment is also the business of business. Polluters must pay. To safeguard the environment and use our natural assets efficiently, we must have collective action.

'Cohesive policy and regulation are required to fully account for externalities and speed up the integration of material environmental issues into investment decisions. The bottom line is that if we are to achieve a sustainable global economy, we must stop drawing down our natural capital.'

Richard Mattison, head of Trucost, said the report was an opportunity 'for investors to encourage companies to use resources more efficiently and pollute less before environmental costs rise further'.

Principles for Responsible Investment | Global | Sustainability

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