The Leader - January/February 2008 - (Page 50) m e e t i NG th e ca r B oN ch a lleN Ge: the ro le o F co mme rci al re al e s tate o W Ne rs , Us e rs & maNaG e rs carbon-based fuels, such as coal-burning electric utilities, transportation fuel providers and the automobile industry. However, other sources of emission, represented by any business that consumes electricity and burns natural gas, will likely be a target by the time carbon regulation hits its full stride. A global “first step” toward stabilizing greenhouse gas concentrations in the atmosphere, the Kyoto Protocol is an agreement under which 169 industrialized countries aim to reduce their collective 2012 emissions by more than 5 percent compared to 1990. Although not yet ratified by the United States, the agreement, which takes effect January 2008, will certainly be a factor that multinational corporations take into account as they plan for the future management and operation of their real estate. This effort, combined with a variety of regional initiatives occurring throughout the United States and a push by many lawmakers for comprehensive and consistent regulation, is likely to dramatically impact the efforts of building owners and managers within the next three to five years. Already, the state of California has enacted legislation designed to reduce greenhouse gas emissions 25 percent to 1990 levels by the year 2020, resulting in what may be the first U.S. buildings emission reduction law. There is a strong likelihood that other regulatory bodies will establish strict reduction guidelines and target dates for achieving them. Therefore, businesses from many industries are taking steps now to educate themselves, evaluate risks and create a plan that allows for gradual improvements across their property portfolio through a variety of programs. Concerned about the cost of managing disparate carbon-reduction programs that could vary state by state, many U.S. companies familiar with the environmental landscape are demanding the certainty of a national standard that can be implemented cost effectively and with consistency across their operations. Efforts by businesses to stay ahead of the curve have resulted in the formation of a variety of global consortiums aimed at tackling the issues surrounding carbonreduction strategies. For example, the Carbon Disclosure Project is a collaboration of global investors seeking disclosure of investment-relevant information about corporate greenhouse gas emissions. The group aims to encourage development of a common emissions methodology and to facilitate its integration into general investment analysis to better understand businesses’ climate change risks. More than 900 multi-national companies responded to the Carbon Disclosure Project’s 2006 questionnaire about their greenhouse gas emission policies, including a significant number of U.S. Standard & Poor’s 500 firms. In 2007, a coalition of 10 major companies with operations across the country banded together with environmental groups to call for nationwide limits on carbon-based emissions. Industry giants General Electric, DuPont Corporation and Alcoa Aluminum are leading this coalition, sending a strong signal that businesses want to get ahead of the political momentum for federal emission controls. The Pew Center for Global Climate Change’s Business Environmental Leadership Council, the largest U.S.based association of corporations focused on addressing the challenges of climate change, has 42 members representing $2.4 trillion in market capitalization and over 3.3 million employees. A wide range of sectors are represented, including technol- ogy, manufacturing, oil and gas, transportation, utilities and chemicals. the coNseQUeNces oF iNactioN While most organizations recognize that taking steps to reduce greenhouse gas emissions is the role of a responsible unit of society, there is also concern among U.S. companies that in the future, investors and insurers will include carbon management in their underwriting criteria. At a minimum, costs imposed upon the sources of carbon emission will be passed through to building occupants and/ or consumers. Some of the world’s largest financial services firms, including Swiss RE, AIG, Fireman’s Fund Insurance Company and Marsh & McLennan are concluding that climate change is a business reality that must be faced, dealt with, mitigated – and perhaps even profited from. Scientists from Lawrence Berkeley National Laboratory have said climate change ultimately threatens to bankrupt even the largest insurers and government-run insurance programs unless steps are taken to reduce warming trends believed to be linked to carbon-based emissions and other greenhouse gases. According to a report by Ceres, a coalition of investors, environmental organizations and other public interest groups, nearly 200 products or services are now offered by insurers or brokers globally, more than half of them in the United States, that attempt to reduce emissions and energy use. For example, Fireman’s Fund has asked regulators to approve its new “green” coverage, including discounted premiums or rate credits for commercial building owners whose buildings are certified as environmentally appropriate, together with discounts for green rebuilds or retrofits of damaged structures. 2 0 0 8 the le ade r 50 J aN Ua rY / F e B rUa r Y
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