World’s top 3,000 companies caused over $2tn environmental damage in 2008

The study’s authors warn that as environmental damage and resource depletion increases, and governments start to apply a more vigorous ‘polluter pays’ principle, the value of large portfolios will be affected through higher insurance premiums, taxes, inflated input prices and the price tags for clean-ups. The study, released yesterday by the UN-backed Principles for Responsible Investment (PRI) and UNEP Finance Initiative, claims that global environmental damage caused by human activity in 2008 represented a monetary value of $6.6tn, equivalent to 11% of global GDP. It pointed out that those global costs are 20% bigger than the $5.4tn decline in the value of pension funds in developed countries caused by the global financial crisis in 2007/8.hideThe study found that the most environmentally damaging business sectors are utilities: oil and gas producers and industrial metals and mining. These three sectors alone accounted for almost $1tn worth of environmental harm in 2008. Trucost, the global environmental research company that carried out the study, said that workers and retirees could see lower pension payments from funds invested in companies exposed to environmental costs. The study projects that the monetary value of annual environmental damage from water and air pollution, greenhouse gas emissions, general waste and depleted resources could reach $28.6tn by 2050 but could be 23% lower if clean and resource-efficient technologies are introduced. The study recommends that investors should exercise their ‘ownership rights’, collaborate to encourage companies and policy-makers to reduce these ‘environmental externalities’, and request regular monitoring and reporting from investment managers on how they are addressing exposure to environmental risk. James Gifford, Executive Director, UN-backed Principles for Responsible Investment, said: “An increasing number of large investors are recognising that environmental externalities generated by one company are likely to come back and hit their portfolios in another place or time. This report provides an important rationale why investors need to exercise leadership and responsible ownership by acting together to reduce corporate externalities.” Paul Clements-Hunt, Executive Director, UNEP Finance Initiative, said: "This report sends a powerful message that the environment is also the business of business. Polluters must pay. Safeguarding the environment and using our natural assets efficiently entail collective action. Cohesive policy and regulation is 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, then we must stop drawing down our natural capital." Richard Mattison, Chief Operating Officer, Trucost, added: “Large companies and investors are exposed to significant environmental costs. These costs are largely linked to greenhouse gas emissions, water use, air pollution and unsustainable resource use that continue to threaten our finite stock of natural capital and prospects for sustainable growth. The report highlights opportunities for investors to encourage companies to use resources more efficiently and pollute less before environmental costs rise further.”

World’s top 3,000 companies caused over $2tn environmental damage in 2008

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