On Dec. 5, 2016, President Sheila Bair traveled to Columbia University in New York City to give a keynote address at the Annual Report Launch of the CDP, the leading global environmental disclosure NGO formerly known as Carbon Disclosure Project. A non-partisan, not-for-profit organization begun 20 years ago, the CDP provides a standardized framework through which companies measure, manage, and disclose greenhouse gas emissions, with the overarching goal that by reducing emissions, investing in businesses that are using sustainable technologies, and seeking a carbon-neutral economy, they limit exposure to climatological risk factors that affect their businesses and supply chains. The event was attended by representatives from hundreds of top international and U.S. firms that participate in the CDP, among them Goldman Sachs, BNY Mellon, Apple, General Motors, Google, Microsoft, Gap, Colgate Palmolive, Stanley Black and Decker, Cisco, Morgan Stanley, Bank of America, State Street, and MetLife. It’s the first time Washington College has been represented at the CDP; President Bair’s speech followed that of Kevin Rudd, the former prime minister of Australia and now president of the Asia Society Policy Institute. Following is the text of her speech:

Good evening Prime Minister Rudd, and all the many guests who make up the extensive CDP community, and especially to Lance Pierce, President, who kindly invited me to speak here tonight:

I’m so pleased to be here tonight to mark the release of the CDP’s Annual Report and scores on climate change performance. I understand that more than 5,500 companies are now disclosing some level of information regarding their carbon exposure. Working with CDP, corporate America has refined and improved its disclosures to make them ever more meaningful and relevant to asset managers and others. Whether the corporate motivation is market-driven, as more and more investors demand this kind of information, or environmentally motivated because it is “the right thing to do”, CDP disclosure data are helping global businesses and their supply chains and networks better prepare for a carbon-neutral economy. This can only be good for our global economy—and our planet—as a whole. That so many businesses are collaborating in this effort means that anything is possible. CDP has been creative, innovative, motivated, and successful. You make things happen, and I congratulate you.

This is an important subject to me because I care deeply about our young people and their future. I want our economy, our financial system, and our environment to be on a long-term, sustainable path. Short-termism too often drives decision-making in our economy. The desire to make a quick profit while ignoring longer-term risks was at the heart of the dangerous behavior that led to our financial crisis, and is equally at play in corporate decision-making that prioritizes short-term cost savings at the expense of our longer-term environmental health.  

In the lead-up to the crisis, mortgage companies originated millions of toxic, abusive mortgages which homeowners had little hope of paying back. Through the securitization process, these companies were paid large fees up front for originating huge volumes of these mortgages, without having to assume the risk of loss when borrowers defaulted later on. Their lack of “skin in the game” gave them every incentive to disregard the huge risks to the economy that were building from the origination of trillions of dollars worth of mortgages destined to default. They were able to externalize the costs of their risky behavior to the broader public, and the result was the worst economic cataclysm since the Great Depression.

Similarly, the ability to impose the costs of poor environmental decision-making on society as a whole creates a market failure that adversely impacts all of us, but particularly our young people, who will most acutely feel the consequences of our rapidly deteriorating global environmental health. It is incumbent on our current generation of leaders to reverse our unsustainable environmental trajectory, as well as to incorporate into our educational programs a knowledge and understanding of environmental issues which will help future generations avoid making the kinds of mistakes we have made. At Washington College, we have launched a new, multi-disciplinary program called Sustainable Finance, which encourages students to think of the financial system in terms of its sustainability, and the broader ramifications of financial practices in terms of their impact on consumers, the economy, and the environment. Having lived through the financial crisis, and seen first-hand, the devastating impact it had on millions of families in terms of lost jobs, lost homes, lost savings, and lost futures, I want to make sure our young people do not make the same kind of mistakes that led to the devastation of 2008. I also want to make sure they understand that poor choices in financing or investing in projects that are toxic to the environment can have even more profound ramifications than the poor lending decisions that led up to 2008.

Washington College is an apt location for the study of environmental sustainability and its relationship to economic health. The town where my college is located—Chestertown—was founded in 1706, and back then, the predominant crop was tobacco. It was productive and lucrative for decades, but by the mid-1700s, the farmers knew they had a problem: tobacco was robbing the soil of nutrients, reducing yields, and their market was becoming unstable. So they did something that must have been extremely scary for them at the time: They shifted their production from what they knew was still profitable—tobacco—to a financial unknown, but also a possibility—wheat. Risky, yes, but prescient. While everyone else around them was still growing tobacco, farmers around Chestertown produced wheat, and this change in strategy ultimately helped Chestertown become one of the wealthiest communities on the Chesapeake Bay in that era.

Today, faculty and students at Washington College consider that history—and the fundamental boldness and economic necessity of that strategic decision—as the College expands it environmental academic programs and prepares to launch an innovative new Eastern Shore Food Lab. Inspired by Copenhagen’s Nordic Food Lab, which celebrates the unique food of its northern climes, our food lab will re-envision our food system on both a local and national level—from how we define food, to how we produce it, profit from it, distribute it, consume it.

How is this related to the work that you are doing with the CDP? In all of its decision-making, teaching, and thinking, the Eastern Shore Food Lab will consider the role of food, including its cultivation, preparation and consumption, in society. Indeed, every decision we make about food affects not only ourselves as individuals and as a people, but our environment, ecosystems, and planet. All of it is interconnected; there are no islands in this interwoven stream of production and consumption.

Likewise, we as a global people, and you as corporate leaders and investors in a global economy, are collaborating in a transition even greater than that which happened in the fields and farms around Chestertown. The impetus to decarbonize the global economy in order to reduce the emissions that are causing this planet to warm too quickly is both an economic necessity and a moral imperative. Investors and businesses like certainty. Yet there are emerging regulations and policy frameworks around the world that companies should be preparing themselves for, because carbon is in the process of being cycled out of many parts of the economy. Climate change itself can change the assumptions on which companies do business—disruptions due to weather or rising sea level can upset the way they source and conduct their business. The risks that climate change impose on us as individuals and as a people are equally reflected in the risks to our financial and economic ecosystems. All of it is interconnected.

And because these are both literal and rhetorical ecosystems we’re talking about—a community of interacting organisms and their physical environment—I want to reflect on how certain elements that enable the health and growth of financial markets are connected to this larger transition into a carbon-neutral economy.

As we make the transition to a new Administration, uncertainties abound about the future direction of government environmental policies. While we can all hope for the best, this uncertainty underscores the importance of private-sector initiatives that do not rely on government fiat for their success. The efficiency of investors’ decisions is only as good as the amount of market information upon which those decisions are based. Moreover, the ability to externalize the consequences of environmentally damaging behavior is fast coming to an end. Virtually all businesses, in one form or another, are having to come to grips with the costs and consequences of rising sea levels, water scarcity, volatile and unreliable energy sources, and the impact of poor air quality on public health. Increasingly, these costs are directly hitting the bottom line. Corporate leaders who are pro-actively addressing them deserve a premium in investment dollars. CDP is playing a crucial role in helping the market self-correct through the power of consistent and meaningful disclosure and inspiring investors to analyze and act on those disclosures.

The fundamental motivation for transparency—to reduce risk, to increase sound investment, to stabilize businesses and economies—parallels the thinking behind the CDP as it relates to the risks posed by climate change and the efforts toward a carbon-neutral economy. CDP has already made enormous inroads into the case for transparency in voluntary disclosure of climate-related risk factors for industry and business worldwide. What began 20 years ago with 35 investors representing $4.5 trillion in assets has grown to over 800 institutional investors, representing $95 trillion in assets—all asking companies for greater transparency in how they are managing systemic risk around climate change. These investors and owners are convinced that climate change poses a systemic risk to the economy, and that businesses must gather more data to better manage that risk, both as an investment strategy and as part of their fiduciary responsibility. More than 5,500 companies now disclose to CDP, making it the largest database of corporate environmental information. And, I’m happy to say that Host Hotels & Resorts, where I am a board member, has for the third year in a row achieved a position on the the CDP’s Climate A list for its leadership in corporate action and strategies on climate change.

Better climate-related information benefits the economy multiple ways—but perhaps most fundamentally, by providing critical data that helps investors make more informed decisions. The CDP may have been ahead of the game, but now other interests are catching up, catalyzed by the Paris Agreement’s goal to reduce global greenhouse gas emissions sufficiently to hold the increase in global temperature to two (2) degrees Celsius above pre-industrial levels. In addition, concerns about how the shift from fossil fuels to more carbon-neutral energy sources like solar and wind will affect the global economy has prompted the G20 to ask the Financial Stability Board to review how the financial sector can incorporate climate-related issues in financial reporting.

In a March 2016 story, the Wall Street Journal reported that, “because there are no unified disclosure rules, it is difficult to put a number on financial companies’ exposures to carbon-heavy assets—and the risks associated with them. Estimates used by the European Systemic Risk Board suggest that banks, pension funds and insurers based in the European Union hold about $1.1 trillion in equity and debt of fossil-fuel companies and that major stock indexes could fall by as much as 20 percent if assets are revalued in line with a 2-degree scenario.”

In light of such scenarios, the FSB created a Task Force on Climate-Related Financial Disclosures, which is now working on creating guidelines for voluntary disclosure to improve consistency, clarity, and accessibility of climate-related financial reporting. The Task Force has noted that existing laws and regulations already require disclosure of climate-related risk “if it is deemed material,” but overall reporting remains fragmented and non-standardized. Using a market-driven approach, the task force plans “to build on existing work to provide a framework that promotes alignment and focuses on financial risks stemming from physical and non-physical climate-related impacts (including transition and liability risks) to better meet the specific needs of users and preparers.” CDP was a precursor to all this.

Now, I want to scope this back down—the way we all must do—from the global, long-term perspective to the local, immediate one. I’m going to take you back to the upper Eastern Shore of Maryland, where Washington College has stood since 1782, when George Washington gave his name to its founding, donated 50 guineas to help get the school off the ground, and served on our first Board of Visitors and Governors. The College and Chestertown are situated along a river that is a major tributary of the Chesapeake Bay. The effects of a changing climate are already visible here. More routinely than not, we are seeing high-tide anomalies that flood the waterfront next to our College’s boathouse and at our town’s marina and waterfront restaurant.

According to the National Oceanic and Atmospheric Administration, sea level rise on the Chesapeake Bay is nearly twice the global average because of geological and other factors. NOAA has noted that while a few millimeters per year might not sound like much, the shallow slope of the coastal plain on which our College and town of Chestertown are situated—and the Bay as a whole—means that a five-millimeter rise in sea level in one year can translate into a five-meter loss of land. A 2013 report from the Maryland Commission on Climate Change found that the state should expect a rise of as much as two feet by 2050.

So while the CDP and your businesses are looking at the economic effects and risks of climate change on a global level, we at Washington College are examining the same risks on a smaller scale, through a variety of prisms. Let me elaborate on a few.

From an administrative standpoint, we have the same mandate of fiduciary responsibility to examine our energy use, minimize our costs, and pursue sustainable alternatives, as should any business. Regrettably, we are an old campus- the 10th oldest in the country actually—so modernizing our systems and achieving greater energy efficiencies continues to be a work in progress. To date, we have decreased greenhouse emissions by 10.4 percent, despite increasing our student enrollment. We’ve done this in part through an initiative to renew our existing physical plant as well as to make our current facilities and operations more efficient and environmentally sound. I might add that not only is this the right thing to do, but it is also helping us achieve savings which can make our outstanding educational program more affordable to our students. Indeed, over the past eight years, we have reduced our energy costs by 11 percent and project savings of $1.2 million over what those costs would be without our green initiatives.

In addition to approximately one-fifth of our physical plant using geothermal heating and cooling—which enables these systems to operate at a 55 percent reduction in energy use compared to conventional systems—we are working on a power purchase agreement for a solar array to be built in a community nearby. This would supply the campus with solar power for up to 50 percent of our annual consumption for 20 years—about six megawatts of power annually. This should enable us to meet our 25 percent emissions reduction goal by 2020.

From an educational standpoint, we place a heavy emphasis on our environmental programs and are particularly proud of the experiential, hands-on opportunities at our Chester River Field Research Station and through our Center for Environment & Society. The research station provides access to more than 5,000 acres of meadows, woods, ponds, grasslands, marshes, and river habitat, offering students a diverse living classroom for fieldwork and study in disciplines including biology, chemistry, ornithology, and environmental sciences. Among the newest initiatives here is the Natural Lands Project, which is encouraging farmers to create buffers along the Chester River to help re-establish bobwhite quail—a regionally significant upland game bird that had been wiped out through habitat loss—and to improve water quality.

The College’s two research vessels take students, teachers, and scientists from the shallows of local creeks to the open water of the Chesapeake, where they can trawl the water column for marine fauna, take sediment core samples, or conduct side-scan sonar sweeps of wrecks and the seafloor. And through our singular Chesapeake Semester, each fall students study the Bay’s history, culture, ecology, politics, and economy and consider environmental issues through each of these perspectives. They travel throughout the 64,000-square-mile watershed, kayaking rivers, researching animals and plants, and talking with watermen, farmers, land managers, and lawmakers. Then, they take what they’ve learned abroad, asking the same questions in a Costa Rican watershed and exploring the shared challenges and solutions with an entirely different culture.

Our environmental programs are steadily growing; indeed, over the past five years, nearly 30 percent of our students have taken at least one environmental course before they graduated. I am particularly interested in expanding joint programs between our business and environmental departments to meet the increasing need for business professionals who are capable of understanding the environmental consequences of their decisions and making environmentally sound choices.

Through coursework we are responsible for educating the citizens of the future who will be facing these issues and their consequences even more directly. We are working with young people at a critical juncture in their lives, when they are deciding who they are going to be, what personal and moral ethos will guide them. The generation coming into the work force now and in the immediate future—our students—sees issues such as sea-level rise, climate change, and a carbon-neutral economy as the new normal, and they want to work for companies that are managing these issues effectively and responsibly. Emerging curricular disciplines and programming can meet the demands of employers who are seeking workers with greater expertise in integrating sustainability into the way businesses operate. Colleges like ours can play a critical role by preparing and educating this new generation of students to meet the demands of employers who need these skills.

And, we’ll soon be launching our new Food Lab that I mentioned earlier, which I think perhaps better than any example illustrates the real core of what we as a College and we all, as a society, need to internalize and act upon. Our students, whether they are pulling stream samples to measure greenhouse gases, or talking with a farmer about the economic hurdles he is facing due to new environmental regulations, are envisioning their world as a series of interconnected ecosystems. They are developing the skills needed to approach this complicated, fragile world by learning what the right questions are and being unafraid to ask them, by communicating clearly what they have learned to broad audiences, by collaborating across disciplines, and by taking action.

We are teaching them to take the long-view of those actions and be guided not by short-term profit incentives, but the long-term health of our planet. Armed with this perspective, they are, like all of you here tonight, making a difference.

Thank you.