October 2010: The UN Environment Programme Finance Initiative (UNEP FI) and Principles for Responsible Investment (PRI) have released a publication titled “Universal Ownership: Why environmental externalities matter to institutional investors.”

The publication calculates the cost of global environmental damage and examines its importance for the economy, capital markets, companies and institutional investors. According to the publication, costs associated with environmental externalities are high and increasing. Caused by greenhouse gas (GHG) emissions, overuse of water, pollution and unsustainable natural resource use, the publication presents annual environmental costs for the global economy in 2008 and projected costs for 2050.

The publication states that reducing GHG emissions, water use and air pollution would have the greatest impact on reducing environmental costs, as GHG emissions and resulting climate change impacts account for a large and growing share of environmental costs – rising from 69% to 73% of externalities between 2008 and 2050.

Noting that five sectors account for 60% of all externalities from the largest 3,000 listed companies, the publication states that reducing GHG emissions in electricity generation, oil and gas production, industrial metals and mining, and the construction and materials sectors would make the greatest impact on reducing carbon costs. [UNEP FI Publication on Environmental Externalities]