Climate Change on Banking and Financial Beats

A series of domestic and global developments are increasing the impact of climate change on the banking and financial industry and reporters covering those beats.

The changes are under way notwithstanding growing pressures from the sagging economy and real estate foreclosures.

Climate change until recently had attracted only scant following among many banking interests; it’s only in the past two years or so that the banking industry has started paying serious attention to Earth’s increasing temperatures. Now financial reporters are writing more about the ways banks respond to their own carbon footprints, the emerging world of carbon emissions trading, and the equally young push to invest in alternative energy. Growing concerns about carbon dioxide emissions more and more are affecting world money markets.

The changes come from several directions.

In the U.S., the Chicago Climate Exchange, which to many seemed downright quirky when first launched in 2003, saw a 123 percent increase in the volume of voluntary trading of carbon credits last year.

Investors are showing cautious interest in alternative energy mutual funds like the nine-month-old Calvert Alternative Energy Fund. For the past year and a half, 40 banks around the world have solicited 100 reports on climate change and its economic effects.

Now, as the science and economics of climate change increasingly influence investing in everything from power plants to new office buildings, banks are researching both the risks and opportunities of warmer average global temperatures.

“I think there is a lot of interest in climate change business coverage, and a strong interest in new ways of looking at the issue,” said Peyton Fleming, spokesman for Ceres, a Massachusetts-based nonprofit coalition of investors and environmental organizations that in January rated banks on how they deal with climate change, “Corporate Governance and Climate Change: The Banking Sector (pdf).” European bank HSBC Holdings PLC had the highest score, 70 out of a possible 100. The top American bank was Bank of America, in seventh place with 56.

“There has been an exponential increase in business coverage focused on the climate change issue,” Fleming said, adding that the uptick has been in the last 12 to 18 months.

But in Europe, the uptick started back around 2001, after negotiations for the Kyoto Protocol, as political and business leaders began working more intently on climate and carbon policies. As a result, some European journalists have had longer experience than their U.S. counterparts covering stories on emissions control, carbon trading, and other responses to climate change.

James Kanter
James Kanter

James Kanter, a Paris-based reporter who covers financial markets and climate change for the International Herald Tribune, (IHT), talked to the Yale Forum by phone and e-mail about how his beat has changed. Kanter has suggestions on how reporters can prepare themselves to cover banks and climate.

Changes Since Kyoto

Kanter, a New York City native, has been covered European and global business matters for IHT since 2005. He won an M&A International Media Award for 2006 and was twice the winner of the Dow Jones awards for best market-moving story in Europe. He has worked as an editor or reporter for The Cambodia Daily in Phnom Penh, Dow Jones Newswires in Brussels, and Financial Times Marketwatch in London.

Kanter said that since 2001, when President Bush “famously turned away from the Kyoto treaty,” Europeans have been pushing policy platforms on emissions, technology, and jobs in response to concerns over adverse impacts of climate change.

As one example of how the U.S. rejection of Kyoto changed the banking climate, Kanter noted that Shell’s chief carbon trader moved his base of operations from New York to London several years ago. “And there were others who did the same,” Kanter said, adding that the changes have helped make London a center of sorts for carbon trading.

London also offers favorable options for listing young companies on the Alternative Investment Market, known as AIM, a submarket of the London Stock Exchange and an appealing notion for start-up companies making such products as solar photovoltaic panels.

As another example of post-Kyoto treaty entrepreneurial overseas activities, Kanter pointed to California energy entrepreneur Robert Hertzberg’s decision to set up a solar company in Wales (see article by Kanter).

The venture capital side of the issue – banks putting up money to fund wind or solar technology, for instance – has been gaining momentum in Europe at roughly the same pace as in the United States. In other words, only recently.

It’s hard to predict what will happen in this new focus on climate change, but banking and financial reporters likely will be increasingly busy covering it.

Kanter wrote in late February that investments in green power look risky on both sides of the Atlantic, in part because of continued uncertainties over firm government support. While biofuels are increasingly being debunked as a serious alternative to fossil fuels, Kanter wrote in that article, “subsidies for renewable energy remain at the whim of politicians, creating a boom and bust cycle for wind farms and solar projects, particularly in the United States.”

Academic studies, and key exposure in Europe

Kanter said he learned a great deal about covering the environment and business while studying for his master’s degree in environmental law and policy. He holds a bachelor’s degree from Columbia University and master’s degree in international journalism from City University in London. He also earned a master’s degree as a Knight Fellow at Yale Law School.

In a previous job covering antitrust and competition policy in Brussels for the Dow Jones Newswires and also for The Wall Street Journal, Kanter learned how the European Commission puts together “policies that sometimes seem a little arcane to outsiders.” He explained that the European Commission, based in Brussels, proposes legislation that European Union governments and the European Parliament then can tweak. Once the European countries ratify legislation proposed by the EU they are bound to it.

The EU has been in a position to make its mark on the world with greenhouse gas emissions capping and trading because this matter was put to one side in the U.S. after President Bush opted out of the Kyoto agreement, Kanter noted, even though Europe had previously looked upon the U.S. as an innovator with its acid rain laws.

Tips for business writers

Asked his advice for business journalists new to climate change issues, Kanter recommended that they seek “one-on-one briefings with leading thinkers in the field who live in your area or city.”

“Try and have an expert at a local university or a leading environmental consultancy talk you through the international political landscape, and then try to have them relate what they’ve described to what is going on in your country, city, or state.” He said green investment specialists, available in most major cities, can be excellent sources. See, for instance, his February 28 piece on the rise of green investments and the potential problems foreseen for them.

As for key background reading, Kanter of course points to the Intergovernmental Panel on Climate Change Fourth Assessment Summary for Policy Makers Synthesis Report.

He suggested that reporters also be familiar with the Stern Review on the Economics of Climate Change. “At least skim it. You will pick up a good understanding of why many economists believe it’s less costly to invest in cutting greenhouse gases now rather than wait until the signs of climate change are more obvious or economically threatening:

In addition, these links might be useful to banking and finance reporters digging into the climate change issue on their beats:

  • The Business of Green,” a blog published by the International Herald Tribune and co-edited by James Kanter; and
  • The site for Ceres, a network of investors and environmental or public policy groups considering climate change and sustainability.

Christine Woodside

Christine Woodside is a freelance writer living in Deep River, Connecticut. She is a regular contributor to The Yale Forum. (E-mail: christine@yaleclimatemediaforum.org, Twitter: @chriswoodside)
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