"The operating profit ratio of the energy industry will be reduced by 35% due to carbon emission rights."
Climate change will reduce the energy industry's operating profit ratio by 35.3 percent, according to a study. According to the results, operating profit ratio of raw materials and construction industries is also expected to decrease by 19.4%.
According to the World Wide Fund for Nature (WWF) on the 21st, Kim Sung-woo, a professor of earth and environment science at Korea University, and a research team made the remarks in a report, "What does the Task Force (TCFD) for the disclosure of financial information related to climate change mean to Korean companies?"
[Provides WWF (World Natural Fund)]
The report analyzed the impact of reducing carbon emissions under the Paris Agreement to prevent climate change. Assuming that carbon emission reduction obligations are achieved through purchase of carbon emission rights, analysis was conducted by comparing operating profit before and after purchasing carbon emission rights as of 2017.
As a result, industries that are most affected by the obligation to reduce carbon emissions have been identified as energy, raw materials and construction sectors.
The operating profit ratio of the energy industry (53 companies including oil, gas, coal and electricity) is expected to drop 35.3 percent from 9 percent to 5.8 percent. The raw material and building industries (344 companies including steel, cement, and petrochemical) will shrink 19.4 percent from 4.3 percent to 3.5 percent, the report showed.
Considering the increasingly tightened regulations on carbon emissions, the price of carbon credits is expected to rise gradually, and as a result, the financial impact is likely to grow further, the report predicted. In addition, given that the energy and raw material industries are the basis of all industries, it is expected to affect other industries as well.
The report is expected to far exceed the cost of reducing carbon emissions, considering other factors, as the company used only one risk factor, carbon emission rights, to generate minimal financial impact. The crisis could turn into an opportunity, especially if each company comes up with measures to cut carbon emissions in a more efficient way than buying carbon credits, the report said.
Estimating the financial impact of each industry on reducing carbon emissions [providing the World Wide Fund for Nature (WWF)
According to the "Evaluation of Korean Companies' Efforts to Respond to Climate Change and Energy Problems" written by Yoon Soon-jin, a professor and research team at Seoul National University's Graduate School of Environmental Studies, SK Telecom, Samsung Electro-Mechanics and KT ranked top among electronics companies in terms of their efforts to cope with climate change and energy issues, including greenhouse gas reduction.
Korea Railroad Corp., Hyundai Mobis Co. and Hankook Tire Co. were among the top carriers in the transportation sector. However, it was pointed out as a problem that the average score of companies in the electronics sector was similar to the highest score in the transportation sector. In addition, the report suggested a direction to analyze the current state of climate behavior by companies and to gain an upper hand in global competitiveness.
These reports suggest the legitimacy of the pre-investment for corporate value management, not passive regulatory responses, through the analysis of corporate value reflecting the rapidly changing global economic trends and the reality of domestic companies. The government also proposed concrete measures to improve climate behavior of domestic companies.
The report was issued as part of a "Change Now for Tomorrow" program jointly run by WWF and Citibank Korea and sponsored by the Citi Foundation. The program has been under way since last year to urge Korean society to take concrete action against climate change issues facing the world.
A WWF official said, "Based on the results of this study, we will share current issues and issues of climate behavior among companies and seek solutions at the Climate Action Roundtable (CART), which will be held on the 13th of next month."
According to the World Wide Fund for Nature (WWF) on the 21st, Kim Sung-woo, a professor of earth and environment science at Korea University, and a research team made the remarks in a report, "What does the Task Force (TCFD) for the disclosure of financial information related to climate change mean to Korean companies?"
[Provides WWF (World Natural Fund)]
The report analyzed the impact of reducing carbon emissions under the Paris Agreement to prevent climate change. Assuming that carbon emission reduction obligations are achieved through purchase of carbon emission rights, analysis was conducted by comparing operating profit before and after purchasing carbon emission rights as of 2017.
As a result, industries that are most affected by the obligation to reduce carbon emissions have been identified as energy, raw materials and construction sectors.
The operating profit ratio of the energy industry (53 companies including oil, gas, coal and electricity) is expected to drop 35.3 percent from 9 percent to 5.8 percent. The raw material and building industries (344 companies including steel, cement, and petrochemical) will shrink 19.4 percent from 4.3 percent to 3.5 percent, the report showed.
Considering the increasingly tightened regulations on carbon emissions, the price of carbon credits is expected to rise gradually, and as a result, the financial impact is likely to grow further, the report predicted. In addition, given that the energy and raw material industries are the basis of all industries, it is expected to affect other industries as well.
The report is expected to far exceed the cost of reducing carbon emissions, considering other factors, as the company used only one risk factor, carbon emission rights, to generate minimal financial impact. The crisis could turn into an opportunity, especially if each company comes up with measures to cut carbon emissions in a more efficient way than buying carbon credits, the report said.
Estimating the financial impact of each industry on reducing carbon emissions [providing the World Wide Fund for Nature (WWF)
According to the "Evaluation of Korean Companies' Efforts to Respond to Climate Change and Energy Problems" written by Yoon Soon-jin, a professor and research team at Seoul National University's Graduate School of Environmental Studies, SK Telecom, Samsung Electro-Mechanics and KT ranked top among electronics companies in terms of their efforts to cope with climate change and energy issues, including greenhouse gas reduction.
Korea Railroad Corp., Hyundai Mobis Co. and Hankook Tire Co. were among the top carriers in the transportation sector. However, it was pointed out as a problem that the average score of companies in the electronics sector was similar to the highest score in the transportation sector. In addition, the report suggested a direction to analyze the current state of climate behavior by companies and to gain an upper hand in global competitiveness.
These reports suggest the legitimacy of the pre-investment for corporate value management, not passive regulatory responses, through the analysis of corporate value reflecting the rapidly changing global economic trends and the reality of domestic companies. The government also proposed concrete measures to improve climate behavior of domestic companies.
The report was issued as part of a "Change Now for Tomorrow" program jointly run by WWF and Citibank Korea and sponsored by the Citi Foundation. The program has been under way since last year to urge Korean society to take concrete action against climate change issues facing the world.
A WWF official said, "Based on the results of this study, we will share current issues and issues of climate behavior among companies and seek solutions at the Climate Action Roundtable (CART), which will be held on the 13th of next month."
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