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Investors Ask BMW, Glencore to Disclose Climate Risk in Accounts

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(Bloomberg) —

Investors managing more than $9 trillion of assets have called on some of Europe’s biggest companies to include an assessment about the impact of climate change in their financial statements.

DWS, Insight Investment and JPMorgan Asset Management are among 38 members of the Institutional Investors Group on Climate Change that wrote to 36 companies requesting they “properly reflect the implications of global commitments to limit temperature increases” as part of the Paris climate agreement, according to a statement released Monday. Airbus SE, BMW AG and Glencore Plc were among recipients of the letter, which was intended for companies with particular exposure to “decarbonization risks” as economies transition away from fossil fuels.

The physical impact of climate change and the pivot towards a low-carbon economy will have a significant effect on companies’ profits and the value of their assets. As such, a growing number of investors want company accounts to be drafted using assumptions in line with the economic realities of a warming planet and the goals of the Paris accord to limit temperature increases to well below 2 degrees Celsius.

“Companies can no longer afford to ignore what climate change means for their business,” said Stephanie Pfeifer, chief executive officer of IIGCC. “Investors need financial impacts of getting onto a net-zero pathway to be booked and acted on.”

The investor coalition, which also includes Aegon Asset Management and Fidelity International, said it expects companies to prepare “Paris-aligned” accounts. To do that, companies should, among other measures, adjust they’re assumptions and estimates to ensure they’re consistent with a target of net-zero carbon emissions by 2050 and consider the implications of a warming world on their capacity to pay dividends, the group said.

Companies that don’t comply with the investors’ requests could face votes against the appointment of directors and even divestment, the investors said.

IIGCC, which is a European investor group for collaboration on climate change with more than 250 members, was among investors managing more than $100 trillion that in September called on companies to publish their 2020 annual reports in line with new guidance from the International Accounting Standards Board that requires climate-related risks to be incorporated in financial statements.

In a separate document on Monday, IIGCC said “there is little evidence that companies are taking decarbonization or the physical impacts from climate change into account as they draw up their financial statements.” When financial statements ignore these impacts, they misinform executives and shareholders, resulting in misdirected capital, the group said.

“Paris-aligned accounts are amongst the most important changes that will drive systemwide capital redeployment,” said Natasha Landell-Mills, head of stewardship at Sarasin & Partners LLP, which is one of the firms among the $9 trillion group. “Put simply, we need Paris-aligned accounts to drive Paris-aligned behavior, thereby protecting capital for all. This is hopefully something that all companies and their shareholders can coalesce around.”


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