Are Companies Disclosing And Prepared For Climate Regulatory Risk?

Today will see the Financial Stability Board’s Task Force on Climate Related Financial Disclosures, chaired by Michael Bloomberg release its Recommendation Report and open a stakeholder consultation period for 60 days.

This is focused on disclosures to investors by companies on climate risks impacting their business.

InfluenceMap has been tracking climate risk disclosure practices by some of the world’s leading companies over the last year – some key findings are noted in the reports below. Our focus is firmly on climate regulatory risk and we have found in general a poor level of disclosure by companies, often accompanied by aggressive lobbying to prevent effective implementation of climate regulations being planned in the US, Europe and elsewhere.

Climate regulatory risk disclosure is a key segment in the Task Force’s disclosure recommendations and this is likely to be a focus of investor attention on climate risk given recent developments. Losses in VW due to regulatory fraud and US investigations into ExxonMobil’s climate disclosures suggest the risk to investors may be real, here and now.

About InfluenceMap’s Climate Risk Analysis

In addition to our continually updated rankings of over 200 leading global companies on their behaviour towards climate regulations, we publish sector reports in response to user need and news trends. The detailed analysis feeds into CDP sector reports and is used by over 100 investors such as Legal & General in its new ‘climate tilted’ Future World Fund, where InfluenceMap metrics are used in L&G’s assessment of companies it invests in.

European Cement and Carbon Pricing Regulatory Risk

November 2016

Cement production accounts for 5% of total global greenhouse gas emissions by humans and evidence suggests that even with a low price on carbon effectively implemented by enabling regulations like the EU ETS, the profits of the sector would collapse. There is scant details in financial filings of these risks from the companies concerned…

The Oil Majors and Climate Risk: What investors need to know

October 2016

All of the oil majors continue to offer only vague projections of how electric vehicle and renewable energy regulations could radically alter their main businesses of oil and gas. Petroleum products for road transport and gas for electricity generation provide the bulk of this sector’s profits and revenues…

Climate risk disclosure by US industrial companies

November 2015

Leading American companies Proctor & Gamble, Boeing and General Electric fail to mention the risk posed by climate change to their operations in annual filings with the SEC. Exxon Mobil inserted an identical 100-word paragraph in its SEC filings for 2012, 2013 and 2014…

Climate policy engagement and the automotive sector

October 2015

Investors may be inclined to look more closely at the auto sector in light of the recent regulatory risks exposed by VW. Past engagement with the regulatory process by the automotive manufacturers on greenhouse has emission and efficiency standards can offer clues as to the culture and behaviour of the companies on emissions testing and compliance in general…

Where the information disclosed about the potential impact of climate risk to the business is false, misleading or incomplete, and this affects the share price, investors can sue

“Shareholders are right to query information from management that they consider unrepresentative of the real risks facing the company. Where the information disclosed about the potential impact of climate risk to the business is false, misleading or incomplete, and this affects the share price, investors can sue. These cases could well represent the next wave of shareholder class actions.” said Alice Garton, Senior Corporate Lawyer, ClientEarth

“It is remarkable how scant risk disclosure is from some of the sectors directly in the firing line of potentially stringent climate motivated policy, such as oil and gas, cement and automotive. When implemented, regulations like California’s Zero Emission Vehicles laws could radically alter corporate business models of the auto and oil companies. Its perhaps no coincidence that, according to our detailed analysis, the poor disclosers in these sectors have been lobbying the most against their successful implementation.” added Dylan Tanner, Executive Director, InfluenceMap