Or other material information. Two key factors in ESG criteria are disclosure and preparedness. Climate change is a huge issue: the more that it progresses, the more effect it will have on a very wide swath of our economy – far more than just the oil and gas industries. These risks can include legislation and regulation related to climate change, international treaties on the issue, in addition to the obvious physical impacts of climate change, like flood, drought, transportation interruption, population migration, crop failure, and more. Many companies have not even explored how these changes will affect their business, not made predictions, not considered pre-emptive adjustments to their business model. Others have put genuine thought into these efforts, and shared their concerns as well as their plans with their investors. These companies, the ones that are looking out the windshield and not the rear-view mirror, these are the ones that have a better chance of their business continuing – continuing in operation, continuing to generate positive returns, continuing in paying their employees wages and their communities taxes, continuing in adjusting to change and sustaining themselves. This is why we call it sustainable investing – looking into a company’s practices and disclosures to determine which models will be sustainable.
The attached NY Times article focuses on two pieces of this – the failure of Peabody Energy to disclose to its investors the impact that increased climate change and the growth of fracking would have on its business (and the subsequent stock price drop from $1000 to $4), and the failure of the SEC to push those it oversees to disclose climate change risk and preparedness to investors, despite interpretive guidance published in 2010 instructing them to do so. More people each day are realizing how valuable the information contained in Environmental, Social, and Governance (ESG) data can be for both operating and investing in the companies of today – and recognizing which have a better chance of being the companies still here tomorrow.