Goldman Sachs: Environmental Issues Not Just For SRIs

The investment community in general—not just “socially responsible” or “green” investors—are showing increasing interest in environmental concerns and associated liabilities, especially those related to climate change, according to a recent research report from Goldman Sachs.

“While many investors consider environmental issues a topic simply for the SRI market, there are important implications from these issues for fundamental investors as well,” the report says. Climate change in particular “may present a host of concerns for individual companies, such as regulatory, reputational, and litigation risks.”

The report pre-dates by only one week the devastating effects of Hurricane Katrina, the intense fury of which some experts have attributed to warmer water in the Gulf Coast. Storm damage has created unprecedented environmental challenges with the submersion of New Orleans in contaminated floodwater and the destruction of oil refineries and chemical facilities. The calamity is certain to raise attention to environmental problems, experts say.

Turner

“The erosion of the Gulf Coast has been on national television every night and the politicians are taking a pounding for their withdrawal of funding for the projects down there,” said Lynn Turner, director of research for Glass Lewis. “There is nothing like a downward trend in the poll results to get the attention of a politician.”

Deborah Savage, director of the Environmental Management Accounting Research and Information Center, said insurance companies are likely to become more vocal about environmental issues than investors. “They’re the ones who are going to cover the losses,” she said.

Savage agreed investors are more concerned than in the past about environmental issues, but she says they’re focused more on liabilities than other environmental costs, like pollution control or efficient use of resources. “Most investors these days care about liability,” she said. “They see environmental management performance as a proxy for general management performance.”

Goldman Sachs declined to discuss the report, which is available from the box above, right.

FASB, IASB Hold Roundtables To Discuss Business Combo. Proposals

The Financial Accounting Standards Board and the International Accounting Standards Board have scheduled joint public roundtables to discuss their parallel proposals on new accounting for business combinations, which seek to treat all combinations as acquisitions.

Discussions are scheduled for Oct. 27 in Norwalk, Conn., and Nov. 9 in London. Individuals or groups that want to participate are required to submit their comment letter on the exposure drafts, or at least a summary of what their comment letters will say, by Sept. 23, and must submit a request to participate by Sept. 15.

The business combination proposals issued in exposure draft form by IASB and FASB represent the two groups’ first significant initiative toward convergence of U.S. standards with those used in much of Europe and elsewhere. The proposals advocate a single accounting method in which one party is always identified as acquiring the other.

IFAC Seeks To Publish Int'l Audit Guide For Small, Medium Entities

The International Federation of Accountants is planning to publish a guide to help smaller and medium-sized entities conduct audits that comply with International Auditing Standards. The objective is to help auditors, wherever they may do business, understand, comply and apply the international audit standards when auditing financials for smaller and medium-sized enterprises.

IFAC has issued a request for proposals, seeking an individual or group with expertise in publishing technical literature for the accounting field to develop the guide. Proposals are due Nov. 18.