Carbon exposure's cost.

• Author: Heffes, Ellen M.
• Position: RISK MANAGEMENT - Brief article

A new analysis indicates that the financial risk to companies in the Standard & Poor's 500-stock index would vary greatly under a cap-and-trade program requiring the purchase of carbon emission credits. The earnings of most companies would be relatively unaffected, but a few could face costs that could more than offset all their earnings.

The not-for-profit Investor Responsibility Research Center Institute and Trucost, a global provider of environmental data and analysis, released Carbon Risks and Opportunities in the S&P 500, which analyzes the potential financial implications of applying a carbon price to global emissions for S&P 500 companies.

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The analysis compares companies and sectors on absolute emissions and carbon intensity, as well as the potential carbon costs relative to revenue and earnings before depreciation, interest, tax and amortization (EBDITA). The...