Climate Risk: Florida's Treasury Gets It, Wall St. Still Clueless

The state of Florida has a chief financial officer named Alex Sink who looks after the state's $140 billion pension fund. Two weeks ago, she told fund managers in charge of a $20 billion chunk that she wanted answers to a new question: how are they calculating the risk of climate change when they decide where to park the state's money. Since joining the Investor Network on Climate Risk in April, Sink did her homework and as a public servant, decided she'd better question the wisdom of trusting taxpayer money to carbon-intensive investments. She's way ahead of many on Wall Street, as evidenced by some analysts who were having a hard time embracing Google's announcement yesterday on renewable energy.

Sink is not alone. The investor network she joined, coordinated by CERES, represents more than $4 trillion in assets. Next week, the Securities and Exchange Commission is meeting with CERES, which is asking the SEC to require companies to disclose climate risk. A dozen other state treasurers like Sink are part of the group. The St. Petersburg Times put it this way:

Sink said Tuesday that it's her responsibility to make sure that money is prudently invested, and there when Floridians need it. Using a century-old analogy, she said she doesn't want to invest taxpayer money in buggy whips if everyone will be driving cars in 20 years.

Google essentially took the same stance in announcing its Renewable Less Than Coal Initiative we wrote about yesterday. The company committed itself to conducting R&D and making investments collectively worth hundreds of millions of dollars to develop clean energy that is cheaper than energy from coal. The New York Times talked to a couple of Wall St. analysts, and here's what they had to say:

“My first reaction when I read about this was, ‘Is this a joke?’” said Jordan Rohan of RBC Capital Markets. “I’ve written off Google’s competition as a threat to Google’s long-term market share gains. But I haven’t written off Google’s own ability to stretch too far and try to do too much. Ultimately, that is the biggest risk in the Google story.”

Robert Peck of Bear Stearns agreed that “the headlines were a little scary at first” and said investors were initially worried that this was another example of Google “trying to bite off more than they can chew.”

You gotta give the Times reporter, Brad Stone, some credit. He read the following passage from a letter written by Google's founders before the company went public in 2004, to elicit a reaction from the hard-boiled analysts. They had written:

Our goal is to develop services that significantly improve the lives of as many people as possible. In pursuing this goal, we may do things that we believe have a positive impact on the world, even if the near-term financial returns are not obvious.

It's a notion that Rohan, who follows Google, had hard time reconciling with a bean-counting perspective focused on the short-term.

“The only positive byproduct of this project that would be anything other than environmental,” he said, “is that it might make Google managers and executives even prouder of the fact that they work there, and it may help retain key employees who think their goal is to do good in the world. But I’m really stretching.”

What planet does this guy inhabit? Wonder if he's managing any of Florida's money.

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