Investors Begin the Push for Natural Capital Transparency

As reported by the New York Times Exxon Mobil recently agreed to inform investors of the risks carbon emission limits would have on their business. This agreement comes in response to a resolution submitted by a group of shareholders from the corporate responsibility advocacy group, “As You Sow.” This is part of a growing trend of shareholder groups urging companies to be more transparent about the financial risks of a changing climate.

At their heart, these initiatives urge companies to be open about the natural capital that they depend upon, and which more importantly, may be threatened in the future. Shareholders, who are concerned about the money they have invested in a company, want to know what hidden risks may exist in these natural capital dependencies. Especially as formerly stable and cheap natural resources are altered, an investor will rightly want to know what these changes mean to a business and their investment.

This is what natural capital asset management is all about! What are the hidden risks, tied up in seemingly cheap or abundant natural capital, that a business faces? This is the question investors are beginning to ask and is the question businesses should start preparing to answer. Properly managing your assets, especially natural capital, means being honest about where your risks lie and requires a true understanding of which assets are vital to your business.

Ultimately, this is more than just pleasing investors. The issue is about the long-term health of a business. Maybe a business will always be dependent upon natural capital (I don’t see MillerCoors getting away from depending upon access to clean water) but by acknowledging these dependencies and analyzing the current future risks associated with them, a business can begin the important process of risk mitigation (just as MillerCoors is doing!). This is what investors are looking for, honest accounting and a plan for long term stability and growth that is compatible with the realities of a changing world.

1 Comment

  • Joe Bellon June 5, 2014 7:28 pm

    Nicely written and makes investors aware that risk is composed of many elements, not just the usual financial indicators.

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