Investors tell European organizations to reveal 'missing' climate costs within their accounts
16 November, 2020
Investors are pushing key European companies to make certain the "missing" costs of climate change are properly reflected in their financial statements, a good approach that could wipe vast amounts of dollars off the value of sectors from energy to aviation.
The European and US investors, who manage US$9 trillion in assets, have sent 36 carbon-heavy companies a record aiming how they should take into account the likely impact of the 2015 Paris climate accord on their future profits.
The investors suspect that existing balance sheets rest on assumptions over variables such as for example oil prices, carbon taxes and the lifespan of fossil fuel assets that are incompatible with a shift to net-zero carbon emissions beneath the Paris deal.
JPM Morgan Asset Management (component of JP Morgan Chase & Co), DWS, Fidelity International and M&G Investments were among 38 asset managers to again the file, according to a copy of an accompanying letter distributed to Reuters by the Institutional Investors Group on Climate Transformation, an industry coalition.
In a statement published on Monday (Nov 16), the investors called on the companies to "address lacking climate change costs in economic accounts".
"Either we get serious and start shifting capital flows towards actions aligned with the Paris Agreement, or we continue to discuss it," said Natasha Landell-Mills, brain of stewardship in London-based asset manager Sarasin & Partners, who wrote the 23-webpage investor expectations document.
"Paris-aligned accounts are amongst the most crucial changes which will drive system-huge capital redeployment," Landell-Mills said.
Among the firms the investors wrote to were Germany's E.ON and Uniper, Spain's Iberdrola and Endesa, France's Air Liquide, Austria's OMV and London-listed Anglo American .
When contacted for comment, the firms variously referred Reuters to existing commitments on the subject of sustainability and climate risk disclosure, emphasised they welcomed investor engagement, and said they needed time to review the requirements.
ACCOUNTING ASSUMPTIONS
The campaign builds on a previous initiative led by Landell-Mills and a short core of investors to challenge European oil majors and their auditors over their accounting assumptions in light of the Paris package.
Landell-Mills said that engagement was vindicated found in June when British major BP said it could write off up to US$17.5 billion from the worthiness of its assets after revising down its long-term coal and oil price forecasts. Anglo-Dutch rival Royal Dutch Shell and France's Total booked smaller impairments.
Regulators experience increasingly been encouraging companies to make voluntary disclosures of how they expect climate change to affect their businesses, plus some countries, including Britain and New Zealand, are making these mandatory.
But the investors declare that accountants and auditors could be failing in their existing legal duties to element in foreseeable risks associated with both the prospect of rapid decarbonisation and physical impacts from climate transformation, meaning companies could be overstating their capital.
"Too many records happen to be leaving out material climate-related impacts, which is not just positioning shareholder capital at risk; it might contain catastrophic consequences for our planet," according to the investors' document.
The file said investors could exert leverage on the problem by engaging directly with audit committees and company boards, by voting out directors and auditors, and by divesting shares.
Bruce Duguid, head of stewardship at the governance advisory arm of Federated Hermes, among the asset managers backing the campaign, said investors would analysis 2020 makes up about "clear evidence" of a reply from both board directors and auditors.
Source: www.channelnewsasia.com