Step into the Arena
The news is apt to raise one’s blood pressure these days. Remember the good ole days? Oh, wait - those were tough times, too, full of their own distressing headlines. So, what are we going to do about it this time? Let's start with a silver lining: the perspective that time seems to arc in a long but positive direction.
To prove this point to myself, I took a look at the past in our own country. However misapplied our system has been, the arc has trended well. Our country started with a group of bold risk takers ditching a capricious monarchy. After some time lording their new-found freedom over those with the least power among them, it dawned on enough people that every person should be in on the county’s promise. Eventually, U.S. Constitutional amendments codified the inclusion of more and more people who were initially excluded. Over time, we have even found ourselves jumping into the fray for the lives and rights of people abroad. But not without steps backward and loud, hand-wringing, insult-hurling fights. None of the ways we did things in the past were clean or without debate. The fight, a prerequisite to progress, has always been over both the ends and the means.
“Today, I’d like to challenge risk professionals in the energy sector to use their expertise in energy commodities to develop sound criteria to measure the risks of emerging energy sources.”
Our very small moment in time is no different. Last week, Reuters reported that 746 financial institutions were set to call on companies to report on a range of social issues, including more data on those companies' environmental impact. This stands in contrast with the views of many, who do not think that private organizations should use tactics that in effect dictate the strategies of other legally operating private companies. Moreover, the task of defining and measuring environmental impact remains more aspirational than anyone prefers to admit.
So, how exactly does one participate in the climate risk curve of the arc? Engage in the debate. This does not mean pushing one's view at all times; it means being both a listener and a speaker, as one who owns the problems as much as the solutions. Today, I’d like to challenge risk professionals in the energy sector to use their expertise in energy commodities to develop sound criteria to measure the risks of emerging energy sources. This is a critical task that only you can accomplish. Without your technical skills, the pricing and data on newer commodities will be skewed in the near term due to regulatory and political pressures. In the longer term, if markets behave the way they often do, the distortions will likely emerge in the form of a massive burst bubble. You do not have to engage alone. Join and participate in the CCRO and other industry bodies. Do not let lawyers, politicians, and financiers back you into a corner from which you will be forced to manage your firm’s risk.
Very messy business. Where we are is the inevitable result of our collective flaws and talents, and just like the arc of history to date, we will make messes and clean them up in a sub-optimal manner. But, if we all step into the arena, in the next emergence we will have more ideas at the table than when we made the last mistakes. And when we are at the end of our egos, we will listen to someone we never heard before, see an option that we have repeatedly ignored, and watch spellbound as we lurch toward a better time. Don’t miss out - get involved!