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Investors Hungry for Climate Change Information

Date: Thursday, February 19, 2009
Author: MSNBC.msn

There is a growing appetite for climate change related information within the investment community and other sectors.

Institutional investors, bankers, bond-rating agencies, insurance companies, investment dealers and other stakeholders are increasingly seeking relevant information about a company's carbon footprint and the effects of climate change on company performance and prospects.

As businesses seek out and/or develop new technologies and innovative processes to reduce green house gas (GHG) emissions or improve energy efficiency, will some companies gain competitive advantage? Are companies prepared for severe weather events that could cause telecommunications difficulties, power outages, transportation problems, supply chain disruptions? Are companies waiting for new building codes or are they already beginning to retrofit their buildings to be more energy efficient? How will climate change affect trade competitiveness? Will new capital expenditure decisions need to be made now and how will these be financed? How will government regulations that put a price on carbon impact financial prospects? Are companies affected by supply chain requirements regarding GHG emissions? Are there implications for a company's reputation and brand?

In response to a growing demand for guidance on providing corporate disclosures about climate change, the Chartered Accountants of Canada published a new document titled: Building a Better MD&A - Climate Change Disclosures. This will help companies provide useful information relevant to investors in particular, as well as other interested stakeholders.

The MD&A (Management's Discussion and Analysis) is a filing required by securities regulators that accompanies quarterly and annual financial statements. A well-presented MD&A provides the context investors need to better understand the company's performance and prospects as well as its financial statements. MD&A disclosures about climate change should allow investors to understand how management views the current and potential impacts of climate change and related regulations on the company, and what actions they are taking accordingly.

The new MD&A publication (see www.cica.ca/climate) features five sections:

- Orientation to the business issues of climate change

- What investors want to know

- Tips on how to develop MD&A disclosures about climate change

- Organizing and presenting these disclosures within the MD&A

- Overseeing the integrity of MD&A disclosures about climate change

In general, institutional investors want to know about the company's strategic approach, risks and risk management related to climate change, its greenhouse gas emissions data, the financial impacts of climate change and relevant governance processes.

Climate change issues will impact some industries and companies more than others. Sooner or later, however, climate change will affect, either directly or indirectly, the business operations and financial performance of many Canadian companies, large and small.

Good MD&As are the key to greater transparency in climate change disclosures to investors.

About the authors: Julie Desjardins and Alan Willis are advisors on climate change and sustainability to the Chartered Accountants of Canada.

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For more information or to arrange an interview, contact:
Tobin Lambie, Manager, Media
(416) 204-3228
Email: tobin.lambie@cica.ca
Website: www.cica.ca