Investors call for systematic climate-related risk reporting

A group of institutional investors has called on companies to assess and report their climate-related risks within their annual report to shareholders, in the interests of prudent and long-term capital stewardship.

The position paper has been signed by Natasha Landell-Mills, head of stewardship at Sarasin & Partners;  Councillor Kieran Quinn, chair of the Local Authority Pension Fund Forum, Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management,  John David, head of Rathbone Greenbank Investments and Adam Matthews, head of engagement for the Church Commissioners and Pensions Board of the Church of England.

The paper states that the disconnect between existing company reporting rules and the lack of disclosure of climate risks needs to be urgently addressed and that this can best be done through disclosures in company annual reports. They state that companies need to adapt because the impacts of climate change, regulatory action and technological disruption are likely to be farreaching and potentially destabilising. The resilience of companies would, they said, depend on early recognition of related risks and foreseeable losses.

At the very least, the investors said, companies where the risks are potentially material, should disclose a discussion of future risks and uncertainties facing the business, and how the board is managing them. For companies where impairments or losses are likely, the board should ensure financial statements present a prudent view of capital and performance, the paper stated.

This shareholder statement comes after the three resolutions put before the mining companies Rio Tinto, Anglo American and Glencore calling for better climate-risk reporting were passed after receiving management backing. This follows the passing of similar resolutions at the oil companies, BP and Shell last year.

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