Putting a Price on Global Environmental Damage
Global environmental damage caused by human activity in 2008 represented a
monetary value of $ 6.6 trillion, equivalent to 11% of global GDP,
calculates a study released today by the UN-backed Principles for
Responsible Investment (PRI) and the UN Environment Programme
Finance Initiative (UNEP FI).
Those global costs are 20% larger than the $ 5.4 trillion
decline in the value of pension funds in developed countries caused
by the global financial crisis in 2007/8.
The study, an initial effort to quantify in monetary terms the
environmental harm caused by business and the possible future
consequences for investor portfolios, fund returns and company
earnings, estimates that in 2008 the world’s top 3,000 public
companies were responsible for a third of all global environmental
The study warns that as environmental damage and resource
depletion increases, and governments start applying a “polluter
pays” principle, the value of large portfolios will be affected
through higher insurance premiums on companies, taxes, inflated
input prices and the price tags for clean-ups.
Paul Clements-Hunt, Head, UN Environment Programme Finance
Initiative, said “This report sends a powerful message that the
environment is also the business of business. Polluters must pay.
Safeguarding the environment and using our natural assets
efficiently entail collective action.”
policy and regulation is required to fully account for
externalities and speed up the integration of material
environmental issues into investment decisions.” Paul
Clements-Hunt, Head, UNEP-FI
“The bottom line is that if we are to
achieve a sustainable global economy, then we must stop drawing
down our natural capital.” he added.
The most environmentally damaging
business sectors are: utilities; oil and gas producers; and
industrial metals and mining.
The most environmentally damaging business sectors are:
utilities; oil and gas producers; and industrial metals and
Those three accounted for almost a trillion dollars worth of
environmental harm in 2008. The top 3,000 companies by market
capitalisation, which represent a large proportion of global equity
markets, were responsible for $ 2.15 trillion worth of
environmental damage in 2008.
Workers and retirees could see lower pension payments from funds
invested in companies exposed to environmental costs, says the
study, which was commissioned by the PRI and UNEP FI and conducted
by Trucost, the London-based environmental consultancy.
The study, projects that the monetary value of annual
environmental damage from water and air pollution, general waste
and depleted resources could reach $28.6 trillion in 2050, or 23%
lower if clean and resource-efficient technologies are
The study recommends investors should exercise their ownership
rights, collaborate to encourage companies and policy-makers to
reduce these environmental externalities, and request regular
monitoring and reporting from investment managers on how they are
addressing exposure to environmental risk.
The Principles for Responsible Investment, convened by UNEP FI
and the UN Global Compact, was established to help investors
achieve better long-term investment returns and sustainable markets
through improved analysis of environmental, social and governance
issues. The Initiative has over 800 signatories from 45 countries
with more than $ 22 trillion of assets under management.