By Mark Gongloff / Bloomberg Opinion
Ignoring climate change’s risk to business is like pretending you can’t catch fire when strolling through a burning building. One of America’s two major political parties wants us to ignore it anyway. But corporate America and its investors know they don’t have that luxury.
Fitch Ratings this week said it would review the impact of climate change on the creditworthiness of more than 1,600 companies. Nearly 20 percent of those companies could have their credit ratings cut as a result, according to an initial Fitch estimate. These companies will have to change the way they do business or potentially face higher borrowing costs.
This follows BlackRock, the world’s biggest asset manager, vowing last week that it would keep pressing corporate boards for plans on handling climate risks, despite months of attacks from Republican politicians over such concerns.
GOP governors and lawmakers around the country have been trying to discourage companies and money managers from considering environmental, social and governance (ESG) issues when making business and investment decisions. They have had some success in places like Florida and Texas, though their power to influence corporate policy may be limited to jawboning and depriving financiers of government dollars.
But President Biden recently used his first veto to kill a congressional effort to make ESG investing more difficult. And the anti-ESG movement has lately gotten significant pushback in even some red states such as Kentucky and Wyoming. That’s partly because blocking ESG investments has been proved to hurt returns and drive up costs to taxpayers, as my colleague Matt Winkler and others have written.
It also doesn’t help that the effects of climate change, at least — part of the “E” in “ESG” — have become increasingly difficult to ignore. They show up routinely in the droughts, wildfires, floods and other natural disasters that have been made more frequent and intense by a heating planet. Last year such catastrophes did more than $165 billion in damage, according to the National Oceanic and Atmospheric Administration. Eighteen separate disasters each cost $1 billion or more. Only two other years — 2020 and 2021 — counted more disasters of that magnitude.
Climate-proofing your operations and investments in the face of such a clear and growing risk is simply good business. There is no evidence that it has anything at all to do with an agenda to force the country to adopt a woke religion or some such nonsense. Even the fossil fuel industry, supposedly a prime beneficiary of anti-ESG actions, seems to get this. It devoted much of its recent CERAWeek confab to talking up its part in the green transition. These companies surely want to go on pumping oil and gas forever, but investors and consumers will only let them go so far.
Most voters are also on board. A recent poll by Heatmap News found that two-thirds of Americans want action to fight climate change, including 61 percent of self-identified Republicans.
Most GOP politicians probably grasp this, too. But the party apparently decided a while back that being anti-woke, which includes being anti-ESG, will help drive its base voters to the polls. It has persisted in this approach even after somewhat disappointing midterm elections and despite a poll showing most Americans actually see “wokeness” in a positive light. Corporate America keeps demonstrating it can’t afford to be so myopic.
Mark Gongloff is a Bloomberg Opinion editor and columnist covering climate change. A former managing editor of Fortune.com, he ran the HuffPost’s business and technology coverage and was a reporter and editor for the Wall Street Journal.
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