IIGCC members pressure companies over climate-related disclosures

Thirty-four members of the Institutional Investors Group on Climate Change (IIGCC), including pension schemes Nest and the USS, have signed letters to 17 of Europe’s largest companies asking why expectations over climate-related accounting disclosures have not been met.

Sent ahead of company’s 2022 AGMs, the letters’ signatories, who collectively represent over $7.1trn in assets, warned of the possibility of increased voting against Audit Committee directors’ appointments if expectations were not met.

Part of an ongoing campaign to seek visibility of how accelerating decarbonisation could impact companies’ financial position, the letters follow previous letters and a copy of ‘Investor Expectations for Paris-aligned Accounts’ sent to 36 companies in November 2020.

The latest letters are copied to lead audit partners for each company to underscore the auditors’ responsibility to alert shareholders to potential misrepresentation where material climate risks are left out of the account.

The ‘Big Four’ audit firms have also been contacted separately in recent months in the UK, US and France with investor expectations on climate accounting.

The latest investor letter stated: “We lack the required visibility to give us confidence that the economic impacts from climate change and associated policy action are being properly accounted for. We have little understanding of how [company]’s financial position might be impacted be accelerating decarbonisation associated with a 1.5°C pathway.”

The 17 companies that received letters were: Air Liquide, Anglo American, Arcelor Mittal, BMW, BP, CRH, Daimler, Enel, Equinor, Glencore, Renault, Rio Tinto, Saint-Gobain, Shell, ThyssenKrupp, TotalEnergies and Volkswagen.

Universities Superannuation Scheme (USS) responsible investment analyst, Philipp Kloucek, commented: “Climate change is a financial risk to the returns generated by our assets. As such, we expect companies to reflect properly the implications of delivering the Paris Agreement in their financial statements and auditors to provide reassurance whether the accounts can be considered Paris-aligned.”

Nest senior responsible investment manager, Katharina Lindmeier, added: “Last year we challenged carbon-intensive companies about making changes. We’re now escalating and writing to their audit committees, calling for climate change to be considered in their financial statements.

“The threat climate change poses to companies is real and as a global investor, with billions of pounds in some of the largest companies in the world, we want that risk taken seriously.”

In addition to signing the letters the IIGCC also released a new report aimed at supporting investors in understanding the $126trn of investment of investment in climate solutions required to meet the goals of the Paris Agreement.

The report, entitled Climate Investment Roadmap: A tool to help investors accelerate the energy transition through investment and engagement, identifies where capital can be directed “most effectively”, mentioning 10 priority technologies, to meet the record investment required by 2050.

Commenting of the report, IIGCC CEO, Stephanie Pfeifer, said: “We are all aware of the scale of investment required to meet the goals of the Paris Agreement, but being able to connect the real world need with portfolio construction – and then measuring contributions – is crucial for investors.

“Failure to do so means investors may not contribute optimally towards meeting the current net-zero pathway investment gap. We now look forward to feedback from investors on the metrics and to developing these further in the next phase of the project.

“The report also highlights the role investors need companies to play in providing relevant climate-related disclosures, for example through metrics such as green capex.

“Without these, investors fail to have a clear and informed picture of the progress made by underlying companies towards delivery of their transition plans.”

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