No longer is global warming merely a scientific issue. More and more state treasurers, pension fund managers, and other investors believe that climate change is now a major economic issue to which all U.S. companies should be responding. Climate change threatens both the financial returns of the companies we all invest in and the performance of state and U.S. economies as a whole. That is why, as Vermont's State Treasurer, I value my participation in the Investor Network on Climate Risk, a group of more than 50 institutional investors that collectively manage more than $3 trillion in assets.

Just as thousands of scientists around the world have come to confront the complexities and environmental threats to the planet from climate change, businesses are beginning to understand the financial risks and opportunities from a warming world. Many have already taken action.

Last year, global renewable energy investments hit another record high, eclipsing $40 billion. The Kyoto Protocol is leading dozens of industrialized countries – and their businesses – to find ways to reduce pollutants that are trapping heat in the atmosphere. The international treaty has spawned a new carbon cap-and-trade program in Europe that rewards companies for reducing emissions. More than 230 million tons of carbon dioxide was traded in the first year, with a value of more than $5 billion.While the United States government declined to ratify Kyoto, global companies based in the United States have no choice but to join the carbon-reducing movement. Whether it is GM cars in Canada or Alcoa aluminum in Europe, the carbon footprint from making and using their products is becoming an increasingly important factor for U.S. businesses competing overseas.

Changing climate conditions and any adverse impact on the health of the Vermont's natural resources could profoundly affect the state's economy. Tourism in Vermont is a multibillion-dollar industry. A 2005 benchmark study of the economic impact of visitor expenditures on the Vermont economy prepared for Vermont Department of Tourism and Marketing estimated that in 2003 direct spending by visitors, which supports an estimated 36,470 jobs for Vermonters, totaled approximately $1.46 billion. Moreover, sectors of the Vermont economy like retail and dining are 2-3 times more dependent on visitor spending than the national average.

Cold-weather recreation, dominated by skiing, snowboarding, and snowmobiling, generates a significant portion of the tourism-based revenue in Vermont. This sector is extremely climate-dependent and has a narrow cost/profit margin. Economic gain or loss can depend on small differences in the weather over a relatively short span of several days or weeks. Warming would generally cause ski areas and snowmobile trails to open later and close earlier, making it difficult to maintain snow-pack and thus shortening the season. Not only does a shortened season reduce potential profitability, it reduces employment as well.

Try to imagine what Vermont's fall season would be without the vibrant reds, oranges and yellows that paint the hillsides in autumn. Scientists who have studied the impacts of climate change on Northeastern forests warn that warming temperatures might adversely affect these seasonal rites of passage by making Vermont's climate less hospitable to sugar maples and changing the character of the state's northern forests. Without sugar maples, Vermont will lose not only the fiery hues of its fall foliage, but all of the jobs and revenues associated with leaf-peeping as well.

Warmer winter temperatures are detrimental to the local maple syrup industry. "Sugarbushes" need a prolonged period of temperatures below 25 F to convert starch to sucrose and to get high sugar content in the sap. A freeze/thaw cycle of cold nights and warm days is required to get the sap flowing. When the nights no longer freeze, the season is over. A warmer climate also encourages arboreal pests, and trees become even further weakened by climate-induced drought and unseasonably harsh storms.

New greenhouse gas regulations may well pose financial risks for U.S. and Vermont companies. A dozen U.S. states are moving to curb greenhouse emissions from automobiles and power plants. Power plant limits are an especially big concern to shareholders of companies like American Electric Power and the Southern Company that burn vast amounts of coal to generate most of their power. And with 140 new coal-fired power plants currently proposed in the United States, many other companies will be assuming new climate risks as well.

But global warming also creates vast opportunities for profitable innovation. Companies such as DuPont and Goldman Sachs are investing billions of dollars in biofuels and other renewable technologies that will thrive in the coming carbon-constrained global economy. General Electric has more than a dozen clean technology products on the market already and forecasts a doubling in sales from these products, to $20 billion a year, by 2010. Numerous Vermont companies such as NRG systems and North Wind Power are successfully meeting worldwide market demand for environmentally sustainable technologies, while supporting economic and employment growth in our state. Although there is much debate over the economic feasibility and aesthetic aspects of wind energy, there is an incredible potential for this clean, resource-independent energy source in Vermont's future. Although Searsburg Wind Farm is the only commercial wind farm currently operating in Vermont, there are several additional proposed projects in the state.

An economic study for Renewable Energy Vermont indicates that just six wind farms located in Vermont could produce 10 percent of the state's electricity. The development and construction phases of these six wind farms would create more than 400 jobs for Vermonters – a mix of highly skilled laborer, construction, engineering, and other quality jobs. Additional jobs would be created for ongoing operation and maintenance. The jobs created through wind energy development would help Vermont grow its economy based on economically strong, yet environmentally-friendly, industries.

Some companies have already begun offering renewable energy options. Central Vermont Public Service offers its customers "Cow Power," a direct farm-to-consumer renewable energy program that works with dairy farmers to process their cow manure and farm waste to generate electricity. The process reduces emissions of methane, which is roughly 20 times more effective than carbon dioxide as a greenhouse gas trapping heat in the atmosphere. More than 2,500 CVPS customers have enrolled in the Cow Power program.

In April, four Vermont farms received grant offers totaling $666,000 from the CVPS Renewable Development Fund. The funds will help defray the cost of building new farm-based electric-generating systems to support the state's largest renewable energy program. The farms need Vermont Public Service Board approval to interconnect the generators, but all four hope to be online later this year.

Green Mountain Power has been recognized on several occasions for excellent environmental management practices. Chris Dutton, GMP's President and Chief Executive Officer, was recently quoted as saying, "Energy efficiency and other environmentally friendly practices make as much sense economically as they do for the health of the environment."

The demand and capacity for biodiesel and other agriculturally-based fuels is also a rapidly expanding market in Vermont. Currently, there are about 14 retail and wholesale biodiesel operating within the state, offering the fuel as an alternative to petroleum diesel for automobiles as well as home heating oil.

Companies that fail to manage carbon exposure in the coming years face enormous financial risks. Although business leaders manage off-balance-sheet risks every day, climate change poses an especially big challenge due to the current uncertainty about future greenhouse gas regulations and the extent of the physical impacts. What assurances do investors have that the companies they invest in are positioned for the opportunities and risks from climate change?

A good tool investors can use in assessing companies is a new report by Ceres and the Investor Responsibility Research Center. The report, Corporate Governance and Climate Change: Making the Connection, uses a 100-point scoring system to assess how 100 leading companies are addressing climate challenges through board oversight, management performance, public disclosure, greenhouse gas emissions accounting, and strategic planning. The report shows that U.S. companies in many key industries are now facing the climate challenge head-on. Unfortunately, this report also shows that most American businesses still lag behind their international peers on the issue – a trend that is making them less competitive and nimble as the global economy shifts to climate-friendly technologies such as hybrid vehicles and renewable fuels. I encourage you to access the report at www.ceres.org and get involved in the paramount issue of our times.

All investors and analysts should have confidence that the companies in their portfolios are preparing and positioning themselves to face future business challenges and opportunities. Climate change should be no exception.

Jeb Spaulding is the Vermont State Treasurer.