Bloomberg climate taskforce targets financial filings

Climate risk information should form part of companies’ routine financial filings, a taskforce led by Michael Bloomberg is recommending.

As companies like Peabody Energy and Exxon Mobil face legal probes over allegedly lying about their exposure, it reinforces moves for greater transparency.

In its first report on Friday, the taskforce emphasised the need to incorporate global warming threats into financial reports.

“That is a big deal,” Curtis Ravenel, a Bloomberg executive on the taskforce’s secretariat told Climate Home. “Once it goes into financial filings, there is all sorts of oversight for companies. The point is to try and institutionalise thinking on this at board level.”

Most G20 countries already require businesses to disclose “material” climate-related risks in their financial reports. But interpretations of what is “material” vary.

Carbon-cutting regulations, clean technology and lawsuits can all hit the value of companies that rely on burning fossil fuels.

Mark Carney, chair of the Financial Stability Board, last year warned there could be market shocks if investors failed to anticipate these trends.

Long-term investors like pension funds are increasingly urging coal and oil majors to face up to the potential carbon crunch.

Yet they face resistance from firms like Exxon Mobil, which maintains that demand for energy will trump global efforts to curb warming.

Members of Bloomberg’s taskforce represent companies ranging from mining giant BHP Billiton to the Industrial and Commercial Bank of China.

They are set to publish a final report by the end of 2016, with voluntary guidelines on what kind of information companies should disclose.

“Our thought is companies will want to adopt the guidelines to avoid the kind of legal implications facing Peabody and Exxon,” said Ravenel.

Responding to the initial report, the Carbon Tracker Initiative emphasised the need to test business plans in line with a 2C warming limit.

“Investors no longer want to see regulatory filings from fossil fuel companies that fail to discuss how the low carbon transition might impact their business models,” said Mark Campanale, founder of the London-based think tank.

The Institutional Investors Group on Climate Change, which represents 120 investors worth €13tn, agreed.

“We strongly support the focus on more standardised disclosures and forward-looking quantitative and qualitative information,” said the group’s chief executive Stephanie Pfeifer. “This will help investors better assess and address carbon risk in their portfolios.”

Jon Williams of consultancy PwC welcomed the taskforce setting out its stall. He said: “There is much ground to cover over the next nine months if it is to deliver on its highly ambitious targets and embed climate-related risks firmly within the financial mainstream.”