CFO Sink addresses the CONFERENCE ON CLIMATE CHANGE

tampa, florida
May 9, 2007


I. Introduction

a. Defining the Role of Chief Financial Officer as it relates to Climate Change; Taking the Long Term Approach to Public Policy.

• I am not an expert on our Earth’s climate. I am not a scientist. I come from a background in the business world. I’ve served as Chief Financial Officer for Florida for a little over a hundred days, but before I ran for public office, I worked for 26 years in the private sector in banking and finance.

• My primary responsibility as your Chief Financial Officer is to protect your assets. You send close to $70 billion to Tallahassee every year, and it’s my job to make sure that your money is managed wisely and not wasted. Our checking account alone averages $20 billion.

• This position of Chief Financial Officer is a relatively new position, and that is one of the reasons why I am so excited about this job; I know that I define this job every day by taking on different issues with financial implications that protect and support Floridians. Climate change is one of those issues.

• Part of the CFO’s role is to think about the long term consequences of our actions – the long term risks. I know that politics plays out today on the Internet and the twenty four hour news cycle, but we need to spend more time considering the long term impact of our decisions as policy makers. We need to think about our decisions not in terms of how it will play on the news in the next twenty four hours, but in terms of how it will effect all of us in the next 24 years.

• That is what leadership is about. Leaders have a responsibility to educate themselves about issues and to think about the long term consequences of their decisions.

B. Reaching a Tipping Point

• I have begun studying climate change, and I want to share with you today a bit about what I’ve learned, and how I see our leadership in Tallahassee and Washington responding to this issue.

• We’ve seen the pictures of the sea levels rising, and the pictures of what Florida could look like in 2100. With Greenland melting, I’ve seen the studies that discuss the impact to Florida after our sea levels rise by just a few inches. It is sobering.

• I believe that we have crossed a critical “tipping point” with climate change. I know that many of you have been studying and working on this issue for decades. Without you, we would never have reached this tipping point. We have you to thank for all the work you have done to get us here.

• In 1990, the Commission on the Future of Florida’s Environment – under Governor Martinez – recommended a program for us to address climate change as a state. But that was 17 years ago – and we didn’t have a lot of action, or a groundswell for government to act. We hadn’t reached this Tipping Point.

• I think there has been a confluence of events that has brought us to this Tipping Point:

1. First, the scientific consensus that has emerged from your work and others to show conclusively how the climate is changing.

2. There was the movie – an Inconvenient Truth – which brought this science of climate change to millions of people. The movie allowed people to understand just how critical this issue really is.

3. There was Hurricane Katrina in August of 2005 and the Tsunami in the Indian Ocean in 2004. There are the fires that have been raging the past few days in Florida. I am the State Fire Marshall. Florida has seen some frightening fires this week. Our firefighters have been working diligently and heroically and I commend them on their efforts. These events – the fires, Katrina, the Tsunami - remind all of us of the extraordinary devastation that can be caused by extreme weather events – and the powers of the forces of nature.

4. There is our continuing war in Iraq – and with that war, the recognition that as long as our nation is dependent on oil as a primary source for our energy, we will likely be involved in the politics and the wars of the Middle East.

• These different events have combined to the point that we have crossed the Tipping Point with global warming. Our leaders in business and government have taken note. In my mind, the science is irrefutable: our climate is changing. No one has to convince me of this fact. The question is what are we going to do as leaders to respond? How are we going to go about fixing it?

II. THE CABINET’S ROLE IN UNDERSTANDING AND RESPONDING TO CLIMATE CHANGE

A. The Cabinet’s Role: Conversations on Climate Change

• As Chief Financial Officer, I serve along with the Governor, Agricultural Commissioner and Attorney General on the Florida Cabinet.

• In my first hundred days, I joined with Commissioner Bronson to launch a series of workshops for the Florida Cabinet called “Conversations on Climate Change.”

• Shortly after we announced our workshop, the Governor discussed climate change in his “State of the State” address. The Governor has also been a leader on this issue – he’s calling for solar panels on the Governor’s mansion.

• The first workshop was in April, and we heard several hours of testimony from some of the leading scientists and thinkers on climate change. Additional workshops are scheduled throughout this year.

• The Cabinet will play a critical role in how Florida responds to climate change.

• Over the past several years Florida’s leaders have not been leading on the issue of climate change. Unlike you all (audience) our state leaders haven’t even really been talking much about it. We have been on the sidelines on this issue as a state, while other states have been much more aggressive.

• After all, we are the 4th largest state in the nation. Not only are we one of the largest states, we are the most vulnerable to the impacts of climate change. We are surrounded by water – no point in this state is more than 80 miles from either the Atlantic Ocean or the Gulf of Mexico.

• Most of us in this state live near the water. More than 75 percent of Floridians – about 13 million people – live in coastal counties.

• Florida should be on the front lines in responding to climate change, and the Florida Cabinet must be a leader in this response. That is one of the reasons why I was eager to start our Cabinet work on this issue as soon as I took office.

B. Financial Impacts of Climate Change: Insurance and Investments

• We have a critical policy making role on climate change in a number of ways.

• First, we serve as the Financial Services Commission for our state. Reporting to the Cabinet is the Office of Insurance Regulation. Insurance companies are already very concerned about climate risk. It will have a dramatic effect on the insurance industry, and the way we insure against risk.

• Also reporting to the Florida Cabinet is the Office of Financial Regulation. Climate change will affect the way this state invests its money, and our future risk assessments. I want to share some thoughts on the relationships between the way we can invest our money in a smarter way – and in a way that takes into account the challenges we face with climate change.

C. Environmental Implications: The Cabinet as Stewards of State Conservation Lands

• The Florida Cabinet serves as the Board of Trustees of the Internal Improvement Trust Fund. We are responsible for acquiring and preserving state lands. We have a responsibility as leaders to think about the value and use of submerged lands, and how we can use our natural land to best offset carbon dioxide. We must be strategic and thoughtful in this process.

D. Energy: the Power Plant Siting Board

• The Florida Cabinet serves as the Electrical Power Plant and Transmission Line Siting Board. We have a responsibility to turn Florida’s energy focus to conservation, renewable sources and strategies that balance our need for more power and our need to sustain the planet.

• So we as a Cabinet have all of these public policy roles and we should use these roles to respond to climate change –

• How we invest our state’s money

• How we insure against future risk

• How we use and develop our state’s land

• How we create and regulate energy in this state.

• But in addition to these public policy roles, we have the bully pulpit of being the elected leaders of this state. As leaders we have a responsibility to educate Floridians – so that we can all make better choices in our day to day lives and that collectively our choices will contribute to the solutions for climate change.

III. CLIMATE CHANGE AND OUR STATE’S INVESTMENTS

• As I mentioned at the outset, as Chief Financial Officer my primary responsibility is to protect your assets. On the Florida Cabinet, we also oversee the Office of Financial Regulation.

• I was at a conference last week and was very interested to see some comments by Goldman Sachs in response to climate change.

• Goldman Sachs’ report says that: “the scientific consensus that climate change is a reality and that human activities are largely responsible for increasing concentration of greenhouse gases in the earth’s atmosphere.”

• Goldman Sachs in analyzing companies is looking at how the management of companies are responding to climate change.

• Part of the value of a company in today’s world is whether it has smart management strategies to assess how climate change will affect the business plan and the risk and opportunities for a business.

• We need to start thinking about climate change in the same way in running this state’s business.

• A part of my role as CFO I am the State Treasurer for Florida. I was proud to announce a few weeks ago that I was the first Florida based institutional investor to join the Investor Network for Climate Risk.

• The INCR has about 50 institutional investors and $3.7 trillion in assets, and is focused on the future financial risks posed by climate change.

• I also was proud to announce that Florida’s State Board of Administration - the best pension fund in the country – also joined the INCR.

• I joined the INCR on behalf of Florida because based on the analysis I’ve seen Florida has more to lose as a result of climate change than any other state.

IV. CLIMATE CHANGE AND OUR STATE’S INSURANCE

• Climate change is not only a financial issue for our state, it is an issue that will have a critical effect on our insurance industry and the way we insure against risk.

• Partly because of Hurricane Katrina, climate change is no longer a “back burner” issue for the insurance industry. This is now a big issue at the National Association of Insurance Commissioners.

• I am very concerned about the impact climate change will on the availability and affordability of insurance.

• I am concerned by the studies that link climate change to the warmer sea temperatures that increase the intensity of these hurricanes.

• There is also the risk of wild fire – which is exacerbated by higher temperatures and drier conditions. The fires in central Florida this week are a frightening example.

• U.S. insurers are skilled at assessing risk using modeling based on past events. But what about the effects of future events – like climate change?

• Nebraska Commissioner of Insurance Tim Wagner – a leader in this area – wrote that: “In Insurance, we tend to look at the past instead of the future, and when you have a dynamic change taking place, looking at the past doesn’t work so well.”

• I’ve been meeting with folks from the insurance industry and challenging them on this issue.

• The industry needs to do a better job understanding and addressing the problem of climate change. We need more accurate modeling

• The industry also needs to provide incentives to reduce the emissions that cause climate change. We can do more in terms of incentives for energy efficient buildings and energy efficient vehicles.

• We are going to have to find creative ways to work with the insurance industry to respond to climate change, but at the same time continue to protect consumers by keeping rates low and working to keep insurance affordable and available in this state.

V. Conclusion

• I believe that we have reached a watershed moment in terms of the public’s understanding and awareness of this issue. It’s now time for those of us who are elected leaders in this state to act.

• Do I need to spend any more time on being convinced by the science? No.

• Do I need your help in solving this issue – the number one issue facing this generation? Yes.

• Thank you very much for having me here today.