Only 25% of global companies report climate-related financial risks
by Bija Knowles
The pressure is growing on companies to report climate-related financial risks in their annual reports, a survey by KPMG has found. The Survey of Corporate Responsibility Reporting 2017 found that only eight of the 94 largest Danish companies acknowledge climate change as a financial risk to be included in the annual accounts. But the consultancy firm said the situation isn't just a Danish one; a quarter of international companies are also failing to report on the financial risk to the bottom line related to extreme weather events such as flooding, drought and hurricanes. The report states: “If companies do not acknowledge the financial risks of climate change, they risk losing investors and the opportunity to cope with the negative consequences they cause.” It adds that the failure to disclose climate-related risks and the potential impacts on products and services leaves investors unaware of how risky their investments really are. As a result, pressure is growing on companies to include climate-related financial risks in their annual reports.
75% of firms issue CR reports
The report included data from 4,900 of the largest companies worldwide, and the main findings suggest that 75 per cent of these companies do not report on climate-related risks. In Denmark, more than 90% of the 94 largest companies do not report on climate-related risks.
Some of the key findings of the survey include:
- around three-quarters of the companies in the survey issue corporate responsibility (CR) reports;
- most of the world’s biggest companies now integrate financial and non-financial data in their annual financial reports (78 per cent), suggesting they believe CR information is relevant for investors;
- Latin America has seen a surge in CR reporting in the past two years, driven by regulation, foreign investor demand and the need to build and protect public trust;
- integrated reporting has taken off in Japan, Brazil, Mexico and Spain;
- the Global Reporting Initiative (GRI) remains the most popular framework for CR reporting. Around two-thirds of reports analysed in this survey apply the GRI G4 Guidelines or Standards.
Quantification and modelling needed
The survey found that 72 per cent of biggest global companies (the 100 biggest companies in 49 countries were analysed) do not acknowledge climate change as a financial risk in their annual reports – but 52 per cent of the world's top 250 companies are reporting on this risk. KPMG's report states: “Of the minority that do acknowledge climate risk, very few attempt to quantify or model the business value at stake. The statistics support the need for initiatives such as the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD)."
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