Are small companies telling investors about climate risks and opportunities that affect their businesses? A new study examined 364 companies to find out.

Pax World Investments and Clean Air-Cool Planet collaborated on the report, Risk and Opportunity in a Low-Carbon Business Climate, which they are publicly releasing on January 5. Pax World, based in Portsmouth, N.H., offers mutual funds and exchange-traded funds focused on sustainable investing. Clean Air-Cool Planet is a nonprofit organization dedicated to finding and promoting solutions to global warming.

Large companies have been steadily increasing their disclosure of the potential impacts of climate change on their businesses, in part because of pressure from shareholders and environmental groups. But small companies have tended to escape attention, the report notes. However, "inattention to climate change and the risks and opportunities that come with it is likely to become a more serious liability for small companies," says the study.

Although climate change legislation has stalled in Congress, the U.S. Environmental Protection Agency has moved ahead with many regulations aimed at limiting emissions of carbon dioxide and other heat-trapping greenhouse gases. On December 7, 2009, EPA Administrator Lisa Jackson signed a final action under the Clean Air Act, finding that six greenhouse gases constitute a threat to public health and welfare, and that the combined emissions from motor vehicles cause and contribute to the climate change problem. The EPA is requiring many companies to start reporting greenhouse gas emissions this year.

"Small companies will have to pay attention to this, too," said Julie Gorte, senior vice president for sustainable investing at Pax World Management, in a recent interview. She added investors are becoming more aware of climate change and want information on what efforts companies are making to lessen their risk or increase their opportunities from it.

The study notes that reporting on any of several types of climate-related risk is generally inadequate among smaller companies. What reporting is done, it adds, is generally limited to only regulatory risk and ignores other potential ones, such as physical, business interruption or supply chain risks.

The companies in the study, written and researched by Helen Mou, represented the top 50% of the market capitalization of the Russell 2000 as of June 5, 2009. The 364 companies were in 10 economic sectors: utilities, materials, energy, industrials, telecommunications, consumer staples, consumer discretionary, information technology, financials and health care.

The four sectors that generally have the greatest impact on the environment and climate change--utilities, materials, energy, and industrials--ranked highest overall on their climate change disclosure, based on eight indicators. The financials, information technology, and health care sectors rank in the bottom three, with health care consistently at the bottom.

The report did not provide a ranking of individual companies, but it did name many companies that stood out. Among them:

ITC Holdings Corp., a utility, disclosed that an electric transmission infrastructure project it's building will transport wind energy from other companies through the Midwest and Great Plains.

Tetra Tech Inc., an industrial company, provides environmental design and consulting services in areas such as LEED certification, alternative energy, carbon management and greenhouse gas inventory assessments.

JetBlue Airways Corp. and UAL Corp., created carbon offset programs to make it easier for passengers to reduce their individual climate impact. Jet Blue was one of the very few companies to attain all eight climate risk indicators that were studied, the report notes.

MasTec Inc., which builds and upgrades infrastructure supporting the telecommunications, utilities, and energy industries, stand out for providing useful components of technologies and services that can contribute to carbon reduction.

In the consumer staples sector, Green Mountain Coffee Roasters Inc. was the only company to report carbon emissions and offer a climate-friendly product, (sustainable and fair trade coffee in disposable "K-cups").

Timberland Co., an outdoor clothing company that has been at the cutting edge of corporate social responsibility and climate risk reporting among smaller companies, stood out for its LEED-certified office buildings, carbon neutrality commitment (for 2010), strong management structure, and willingness to work with regional stakeholders.

Out of 25 REITs researched, only four owned LEED-certified properties. They include American Campus Communities Inc., Highwoods Properties Inc., Corporate Office Properties Trust and Bio-Med Realty Trust Inc.

The report makes these recommendations:
1. Industry trade groups should undertake an effort to develop reporting guidelines for smaller companies.
2. Asset managers and investment counselors should make a practice of noting the absence of climate-risk reporting, thus creating an enhanced incentive for smaller companies to report--and pointing out the potential investment advantages of acting on climate change risks and reporting that action.
3. Investment organizations and businesses and groups working on sustainability or climate issues should offer guidance to smaller companies in order to promote reporting standards, efficiency and effectiveness.