Heavy investors demand more disclosure of environmental risks

Amazon, Facebook, Tesla and Berkshire Hathaway have failed to pass on data to their shareholders on climate change, according to a coalition of heavyweight investors, who are demanding that 1,320 companies make clearer disclosures about environmental risks.

Fears that climate change will result in catastrophic damage to the environment fuel the demands of institutional investors and regulators for companies to accelerate their efforts to achieve the goal of a zero-carbon net economy.

In front of the Climate conference Cop26 in Glasgow scheduled for November, 168 wealth managers and financial institutions from 28 countries, which together account for more than $ 17tn in combined equity, have signed up to support the Carbon Disclosure Project campaign to ensure that data on climate change , deforestation and water use are correctly reported by companies.

According to CDP, more than 4,700 megatonnes (Mt) of carbon dioxide emissions are estimated to be produced by the 1,320 target companies, more than across the EU.

Emily Kreps, global director of capital markets at CDP, said the tide was turning against companies that were not responding to investors ’demands for better disclosure of environmental risks.

“This year’s campaign against non-disclosure has achieved record levels of support with a 56 per cent increase in investor participation. Investors need data that is consistent, comparable and complete to help them meet their own net-zero ambitions, ”Kreps said.

U.S. regulators are engaged in a fierce debate over whether to impose formal disclosure requirements for environmental, social, and governance metrics on U.S. companies.

Amazon and Facebook have signed one letter this month to the Securities and Exchange Commission stating that they supported “regular and consistent reporting of climate-related issues,” also urging the U.S. regulator to allow ESG data to be published separately from the main financial reports of the company to avoid possible legal problems.

“ESG mandatory disclosure is an essential planning tool that can help establish regulatory certainty and a level playing field,” said Paula DiPerna, special advisor to CDP North America.

Roche, Swiss pharmaceutical manufacturer Chipotle Mexican Grill, U.S. burrito chain and American case maker Lennar are among 73 laggards that provide inadequate disclosures on the three environmental issues highlighted by CDP.

Requests for improved disclosures were also addressed to 122 Chinese companies including Alibaba trading group, Kweichow Moutai, distiller and Meituan Dianping, the largest food delivery app in China.

Environmental disclosure standards show signs of improvement due to pressure from large investors. The campaign coordinated last year by CDP led to 206 companies responding to disclosure requests from investors, from 97 in 2019.

But the financial sector needs to do more to help achieve the goal of a zero carbon net economy with less than half of banks, wealth managers and insurers taking steps to ensure their investment portfolios are aligned with the limits on rising global temperatures, according to CDP.

Amundi, Aviva, Cathay Financial, HSBC Global Asset Management, Legal & General, Nuveen and Schroders have pledged to support the CDP campaign.

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