Carney’s climate change body tells buyside to pull its weight

World Economic Forum

The FSB’s climate task force was set up by Bank of England governor Mark Carney,

The FSB’s recommendations, published on December 14, urged asset owners and managers which “sit at the top of the investment chain” to flex their muscles in improving companies’ climate change reporting standards.

It stated: “The task force believes climate-related financial information should be provided to asset managers’ clients and asset owners’ beneficiaries so that they may better understand the performance of their assets, consider the risks of their investments, and make more informed investment choices.”

The task force, set up in December 2015 by Bank of England Governor Mark Carney, and chaired by former New York Mayor Michael Bloomberg, recommended companies include information on their carbon emissions and other climate-related information in their regular financial reporting, saying that “climate-related risks are material risks for many organisations”.

It wants companies to publish scenario analyses, in which they assess the impact of various climate-change scenarios – with specific reference made to two degrees of global warming – on their businesses. It said: “Over time, the task force would expect to see more quantitative analysis in disclosures”.

Fund managers, such as Schroders, Amundi and Legal & General Investment Management as well as the Church of England’s investment fund, have lined up behind efforts to get oil companies in particular to make such disclosures. Many have done so voluntarily, though some, such as ExxonMobil, have resisted.

Investor groups such as the CDP have been pushing for such disclosures for years. Paul Simpson, chief executive of the CDP, said in a statement this morning: “Many companies have yet to align business strategies with the requirements of the Paris agreement and the [Task Force’s] recommendation on scenario analysis will enable better information for investors to assess this risk.”

The task force also wants more reporting from managers and investors – such as pension funds – on the climate risks in their portfolios, though it recognises “some asset owners and asset managers may be able to report such information on only a portion of their investments given data availability and methodological issues.”

In a separate statement, Martin Skancke, chair of the Principles for Responsible Investment and a member of the task force, said: “Investors — asset owners and investment managers — in addition to encouraging more disclosure from companies, will also need to commit to report their own climate policies. So we should expect more reporting on climate risk by investors themselves.”

And the task force urged fund managers and pension funds to pile pressure on companies: “Asset owners should engage with the organisations in which they invest to encourage adoption of these recommendations. They should also ask their asset managers to adopt these recommendations.”

The task force’s broad recommendations – which are structured around four thematic areas spanning corporate governance, strategy, risk management and metrics and targets – come at a pinch point for the climate-change movement, with concerns raised that last month’s election of US President-elect Donald Trump may derail green investment momentum.

According to responsible investment lobby group US SIF, sustainably-invested assets in the US have grown from $ 6.57 trillion in 2014 to $ 8.7 trillion at the beginning of 2016.

The taskforce is launching a 60-day public consultation period on its ideas, with its final report to be presented to G20 finance ministers at the next meeting in June 2017.

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