AS THE STOCK MARKET

quakes over mortgage losses in the hundreds of billions, consider how piddling this sum might seem after a couple more decades of global warming. According to a newly leaked

by U.N. Secretary-General Ban Ki-moon, the tab to deal with that crisis could run into $20 trillion over the next quarter century or so. That's almost 50% more than the current value of U.S. equities, the equivalent of 18 months of the U.S. gross domestic product. Housing could prove the least of our worries, in the long run: The weather will find us whether we own or rent.

How to account for that risk? Utilities facing the threat of new emission curbs have already taken the first steps, as have multinationals trying to look green and acceding to pressure from shareholders. Meanwhile, some activists want the courts to do the figuring and to apportion the blame.

In 2005, a group of property owners in Mississippi brought a lawsuit against several oil, chemical and coal companies. The residents claimed that Exxon Mobil, Chevron, Duke Energy and others were liable for emitting greenhouse gases that contributed to global warming, which in turn raised the temperature of seawater in the Gulf of Mexico and intensified Hurricane Katrina's strength.

The case, Comer vs. Murphy Oil USA, was dismissed last August and is now under appeal, one of several lawsuits brought by individuals and environmental groups attempting to hold industry accountable for its contributions to global warming.

In another case, the state of California sued GM, Toyota, Ford and other car makers in 2006, alleging that vehicle emissions were causing climate changes and hundreds of millions of dollars in damages to the state. (The case is also under appeal.)

Proving what contribution to global warming was made by a particular utility, car maker or refinery is difficult to say the least. David Montgomery, who directs the environmental practice for CRA International, a consultancy in Washington, D.C., says it's a doomed effort. "It's basically harassment. The notion that you can sue someone for causing global warming is absurd," Montgomery says.

Still, such suits are on the rise as the case for global warming hazards gains acceptance with every major scientific report, corporate acknowledgment and award for Al Gore. Not content to wait for federal legislation moving at its current glacial speed, groups are trying to bring about change on a smaller scale.

The Securities and Exchange Commission is also being pressured to act. A coalition of environmental groups and investors asked the SEC in September to require companies to assess and disclose their climate change risk exposure along with other financial risks. But Montgomery says it's already part of a company's fiduciary duty to report "material" risk which would include climate change where applicable. We asked Montgomery to guide us through a regulatory maze that remains a work in progress.

SmartMoney.com: How important is potential carbon-reduction legislation to companies? Will these regulations be akin to corporate governance regulations?

David Montgomery: If there's legislation that's going to put a price on carbon emissions, most companies interpret that and ask what's that going to mean for us. So yes, it's really important. We do a tremendous amount of work with companies as they understand what the risks are and as they come to think about strategies to reduce those risks and protect shareholders. We are finding companies are increasingly sensitive to them. I think this is going to be an important part of corporate governance. We've helped companies that have gone through precisely this; they've written reports to shareholders detailing those risks. Southern Co. gave a reportKansas City Power & Light, a subsidiary of Great Plains Energy] did one last year. They're good examples of how electric power companies are approaching this issue.

SM: Should the SEC make this sort of disclosure mandatory?

DM: Absolutely not. Making companies disclose risks due to climate change is absurd.

SM: Why?

DM: Companies are already required to report all the material risks that they foresee for anything. And that covers climate. And they're doing it. They're doing it not because of a regulatory requirement, but because it affects their business. They're there to make money and protect their shareholders. If they don't do it, the market will punish them.

SM: Can you elaborate on how climate-change legislation may affect the business and shareholder value of a company like Southern?

DM: They were focusing on climate legislation. They were looking at different scenarios of different legislation that could be passed and how it would affect their costs, demand for their services, the technologies they use for generation... Both [Southern and KCP&L] went through and did a systematic review of their investment plans. Whether under what they thought were likely possibilities of legislation, whether they were making a robust set of decisions. They laid it all out.... It varies by industry. In the electric power industry it's clearly what Congress is doing now the Lieberman-Warner bill on climate legislation. They're seeing where that goes. It may or may not come to a vote. Most analysts don't think we'll see climate legislation until after the presidential election. That legislation is the big issue for the electric power industry.

There's also state-level regulation. States are adopting renewable portfolio standards, their own climate policies. And, more importantly, regulators are making it difficult to build coal-fired power plants. So utilities are facing pressure from a number of directions.... They also need to build lots of power plants to meet [demand.] Their regulatory environment is changing. They are facing great difficulty in siting power plants because of local opposition, and the same credit crunch everyone else is facing to finance their projects. And there's the uncertain prospect of climate legislation.... So any choice you make today could be a mistake. They could decide to build coal-fired plants, which would be good if there won't be tight carbon limits... They're going to be facing risks no matter what. So you can disclose to shareholders that no matter what we do there are going to be risks.

SM: Do you think companies face real risk of climate-change litigation? Is that something shareholders should worry about?

DM: These are basically nuisance lawsuits. It's basically harassment. The notion that you can sue someone for causing global warming is absurd. The science is too uncertain to establish a tight connection. Global warming stems from a combination of emissions over a long period of time. Trying to point to one firm and say you are responsible for damage it flies against every legal principle, because what companies are doing is perfectly legal.... They're taking due care. They're doing nothing illegal. It's impossible to draw a connection between their emissions and any particular damage.

SM: What about comparing these cases to the lawsuits against the tobacco industry or the asbestos lawsuits?

DM: Advocacy and environmental groups are trying to use the threat of lawsuits to get companies to do what think they should be doing. I see very little prospect that these threats are anything more than that. They're efforts to pressure the companies to do something.... Managers and companies are being threatened by something not in shareholders' interest. You don't need lawsuits to take that into account. They already have that responsibility.

Frivolous legislation is a big problem in the U.S. We need tort reform. It may well be these frivolous lawsuits and efforts to harass directors are increasing these companies' costs... They're trying to create carbon policy through the courts on what Congress and legislators are not ready to do. If someone wants to see businesses change their behavior on carbon legislation, that's something for Congress to act on. These are backdoor attempts to make Congress address it. It's up to Congress, not the courts. It is an attempt to speed up the process. But is that the right way? It is a political decision; we need to see what the people of the United States are willing to do.