Nuclear meltdowns are bad for investment returns

[kristopher]

Their diagnosis includes systemic disorders of regulatory failure, organisational learning disabilities, an immature conception of risk, weak leadership and anemic concern for negative externalities

Nuclear meltdowns are bad for investment returns

by yemisi on 05. May, 2011 in Blog

Members of the NSFM Coordinating Team write: In the Financial Times this week, two NSFM participants – Raj Thamotheram and Maxime Le Floc’h – compare the Gulf of Mexico and Fukushima events and highlight the important role that institutional investors could play with regards to these events. Their diagnosis includes systemic disorders of regulatory failure, organisational learning disabilities, an immature conception of risk, weak leadership and anemic concern for negative externalities.

Their focus on industrial catastrophes is timely, given that leading experts – Nassim Taleb and Charles Perrow included – believe such events are becoming more frequent and more serious as a result of the growing complexity of operations and concentration of economic and other power within corporations today. But important as they are, such catastrophes are, arguably, only the visible tip of an iceberg of value destruction, with much of the damage being “under the water line”.

Duke University economists who studied CFO decision-making in response to the pressure to deliver on the quarterly number concluded that: “<…> the destruction of shareholder value through legal means is pervasive, perhaps even a routine way of doing business. Indeed we assert that the amount of value destroyed by companies striving to hit earning targets exceeds the value lost in these high-profile fraud cases.” Even prominent critics of corporate behaviour have questioned whether shareholders are “part of the solution or part of the problem.”

One way that shareholders contribute to value destruction is through narrow analytical frameworks and fundamentalist shareholder value assumptions. For example, it is well known within the industry that there is a big gap between what happens in the mainstream research supply chain and what long-term investors, leave aside what responsible ones, really need.

Our NSFM colleagues...

http://www.sustainablefinancialmarkets.net/2011/05/05/nuclear-meltdowns-are-bad-for-investment-returns/

[qb]

1. How about in the USA, where taxpayers assume all of the risk...

a meltdown wouldn't be that bad for investors, would it?
:sarcasm:

[kristopher]

2. That isn't exactly accurate....

If losses are confined to the nuclear plant itself, the industry is protected and the taxpayers will not be on the hook for any more than the consequences of the loss of power.

But anything outside the bounds of the plant (such as relocating hundreds of thousands or millions of people because you've made their homes uninhabitable)???

Well, we couldn't expect any industry to pick up the tab for that, could we? Of course, no other industry could cause it either....