Companies’ Climate Risks Are in Focus
This week, we talk about how companies face growing pressure to disclose climate-related risks and the rise of value stocks.
Welcome to our weekly chat about the environmental and social issues that influence the way we work, spend our money and live our lives. We're your hosts, Maitane Sardon and Dieter Holger. Want to get our newsletter every Wednesday? Hit the subscribe button in the upper right corner and please share with your friends!
Hi, Maitane! Many companies in the U.S. aren’t disclosing the data investors need to evaluate climate change risks, even as pressure grows from many stakeholders.
One company that has been more open is Hewlett-Packard. After Hurricane Harvey flooded its largest campus and data center in Texas, the company decided to move its manufacturing out of the Houston area to places that are less prone to extreme weather events.
It also disclosed to investors what it said were climate-related risks. HP said one reason it chose a new location in the Midwest was because the region was “less vulnerable to acute physical climate-related risk.”
Yes, it also said a global temperature increase of more than 2 degrees Celsius could result in extreme weather events that could cost the company $800 million, versus $200 million for a smaller increase of 1.5 degrees.
HP could offer lessons to other corporations that are expecting more rigorous requirements for climate disclosures under the Biden administration. The Securities and Exchange Commission’s acting chair has voiced strong support for more disclosures from companies on environmental, social and governance issues to help investors.
Another thing I’m watching is the performance of companies whose fortunes are tied to economic growth. As countries accelerate the rollout of coronavirus vaccines and the economy starts to recover from last year’s shutdowns, investors are turning their attention to certain types of companies that haven’t performed well over the past decade, referred to as value stocks.
Stock-market analysts use the term to refer to companies whose shares are underpriced by the market and that have the potential for an increase in price. They generally trade at a lower price than their book value or net worth.
You’ll usually hear fund managers compare the performance of these stocks with growth stocks, which are companies that have had strong growth in earnings and revenue and could keep doing well regardless of how the economy is doing.
Cyclical firms that sell products following trends in the overall economy usually fit the description of value stocks. One example is oil, whose consumption dropped during the pandemic due to widespread lockdown measures.
What am I looking at? The chart above shows the performance year-to-date of two indexes investors use to measure the performance of U.S. growth and value stocks. Amazon, Apple and Tesla are included in the Russell 1000 Growth Index while oil giants Exxon Mobil and Chevron are part of the Russell 1000 Value Index.
We’ll keep an eye on the economy as we march toward more normalcy from the pandemic.
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Meet the team:
Elevate the Conversation is produced by the editorial teams of The Wall Street Journal and Dow Jones Newswires. Here's a little bit more about us, along with our contact information. We'd love to hear from you.
Dieter Holger, Reporter: I have a knack for uncovering values-based investing trends and I’m obsessed with spreadsheets and charts. I really enjoy ‘80s music and skateboarding (but I suck). dieter.holger@wsj.com @dieterholger
Maitane Sardon, Reporter: I have a passion for amplifying the voices of those at the center of stories. I love running on Barcelona’s beaches and binging on chocolate ice-cream to compensate (it’s all about balance). maitane.sardon@wsj.com @sardonmaitane
Catherine Lindsay, Editor: I like breaking down complex ideas and explaining them. On the weekend, you’ll find me wandering the city with my film camera at the ready. catherine.lindsay@wsj.com @CathsLindsay
Tammy Lian, Designer: As a visual producer, I'm always excited by the challenge of creative problem solving. In my spare time, you can usually find me taking care of my ever-growing collection of plants and drinking tea. tammy.lian@wsj.com @violian.tammy