NEW YORK, NY April 24, 2007 —Today in our continuing series on climate change, we look at Wall Street. New York's financial firms are heavily invested in power, oil and gas, and mining companies - all big emitters of greenhouse gases. WNYC's Lisa Chow finds out how some banks view their role in addressing climate change.

Part of Feeling the Heat: New York Responds to Climate Change

REPORTER: People on Wall Street are still talking about the TXU deal. The Texas utility had been battling environmentalists over a plan to build 11 new coal plants. Then in February, Goldman Sachs and two private equity firms agreed to buy TXU for 32 billion dollars but they didn't want to inherit the utility's lawsuits and bad publicity. So they brought in environmentalists and agreed to cut the number of coal plants from 11 to 3.

REILLY: There was concern about giving these stakeholders a degree of influence and power that is very significant and is probably unprecedented.

REPORTER: William Reilly's with TPG Capital and was a key player in the pending deal.

REILLY: But all of us came to feel that this was the better way to go given our concerns to be responsible and to be seen to be responsible.

REPORTER: But the deal hasn't convinced everyone. While Reilly spoke at Goldman Sachs' first conference on climate change, security guards watched nine men and women protest in front of the company's headquarters.

WATTERBERG: The coal keeps burning and we keep earning.

REPORTER: John Watterberg is dressed in a brown, three-piece pinstriped suit. His hair is pulled back in a ponytail, underneath a tall black hat made to look like a smokestack. TXU is written on it in aqua blue.

WATTERBERG: Thanks to friends like Goldman Sachs. We can look forward to rising ocean levels, which means more beachfront property.

REPORTER: Goldman Sachs wouldn't comment on the protesters' campaign but it does see itself as a leader. Mark Tercek is a managing director and heads up Goldman' new environmental center.

TERCEK: It happens that our capabilities, our global reach, the talent of our people, the business we're in line up rather nicely against some opportunities to have a real positive impact on various environmental matters including climate change.

REPORTER: He says the firm has invested more than 1.5 billion dollars in wind, solar and biofuel companies. It sells reports that evaluate companies on their environmental record. And it participates in the growing carbon emissions trading business in Europe.

TERCEK: We spend a lot of our time talking to CEOs, boards of directors, senior management teams about environmental matters broadly, environmental risks and opportunities specifically, and how other companies might do what we've done in the environmental area.

REPORTER: He says Goldman's agreement to reduce the number of new coal plants in Texas is now famous. The firm is also a big shareholder of Exxon Mobil and the Industrial and Commercial Bank of China, which heavily finances China's manufacturing, transport and energy sectors. Is Goldman encouraging those companies to assess their environmental risks? Tercek didn't want to answer specific questions about the firm's relationships.

TERCEK: We're an investment bank. We're not a political agency. We're not a regulatory body and so with regard to environmental problems broadly, climate change in particular, we're not interested in telling other people what to do or how they should be regulated.

REPORTER: That's the government's role. At Citigroup, managing director Greg Gordon is already thinking about how a federal cap on carbon emissions will affect the companies he covers. He studies the utility industry.

GORDON: Ask Rudy Giuliani or John McCain or Barack Obama or Hillary Clinton or any of the other ostensible front runners for the 2008 elections and they are universally pro carbon caps and so it is not a matter of if, it's a matter of when. So my job as a security analyst is to get out ahead of these uncertainties and try to value them so when they happen investors can either profit or avoid loss.

REPORTER: He says regulation will create winners and losers. Nuclear is a winner because it doesn't emit carbon. Coal is a loser in regions where it competes with natural gas. But who wins and who loses will ultimately depend on how much companies have to pay for each ton of greenhouse gases they emit.

DAVIDSEN: If you run the numbers and look at a 10 dollar price or a 30 dollar price clearly there's a difference.

REPORTER: Amy Davidsen is the environmental director at J-P Morgan Chase, which finances power, oil and gas and chemical companies.

DAVIDSEN: But since we're dealing right now with a zero price of carbon you do have this window of time where economically something might make sense, but it might not make sense for the environment.

REPORTER: She says her clients making long term capital investments want clarity from Washington.

DAVIDSEN: The US should be acting today, demonstrating leadership rather than waiting for some of the developing countries to act.

REPORTER: So far President Bush has refused to support mandatory limits on greenhouse gas emissions.

KARSNER: We're all on earth here feeling our way.

REPORTER: Andy Karsner is an assistant secretary at the U.S. Department of Energy. He oversees federal programs in energy efficiency and renewable energy.

KARSNER: And the truth about a cap and trade regime is until one is universal and includes India and China and the world's fastest growing emitters, it's really about moving emissions around rather than slowing them down and capping them.

REPORTER: He says government should invest in renewable energy, not regulate carbon.

KARSNER: There is an argument to say that when you put an artificial price on something, you may create an artificial price umbrella and allow things to drift up in price.

REPORTER: It took a few questions to figure out the argument, but here's his logic. Restrictions on carbon emissions will make energy from coal, oil and gas more expensive. Which means more people will want renewable energy products like solar panels. As the demand for solar panels shoots up, so does the price.

KARSNER: Making them a luxury product, making them so the third world can no longer afford them for the deployment across Africa and the third of humanity that has no access to light, when we thought they'd become the greatest hope, these are consequences we have to look at in the whole picture.

REPORTER: Of course many economists would argue that if demand for solar panels shoots up, competition will force the prices to come down in the long term. Just as it happened with DVD players. So government looks to the market, and the market looks to government. And it's in THIS space where you'll find Wall Street cutting the number of new coal plants in Texas while continuing to invest in coal, oil and gas companies. Because the reality is Americans continue to burn through more coal, oil and gas. And Wall Street will only be as green as the consumers. For WNYC, I'm Lisa Chow.