The U.K. Parliament's Environmental Audit Committee on Monday called on the government to require publicly-listed companies and asset owners including pension funds to properly recognize and disclose the financial risks of climate change by 2022.
"There is growing recognition that climate change—and the world’s response to it—will pose financial risks over the coming years and decades," the MPs said in the report.
"In the 40 to 50 years it will take today’s young people to reach retirement age, the projected rise in sea levels and the increased frequency and intensity of extreme weather events will have economic consequences for a range of investments—from food and farming to infrastructure, home building and insurance.
"Proper recognition and disclosure of these risks and opportunities would help financial markets to work more efficiently and will enable U.K. institutions and investors to position themselves to benefit from the low-carbon transition," they added.
The Bank of England and Governor Mark Carney have shown leadership on this issue, setting out the risks to financial stability and putting the issue on the agenda of the G20, the MPs underlined.
"The U.K. could help galvanize global momentum on climate-related risk disclosures by announcing at the G20's leader summit in November that it will implement climate-related financial disclosures fully and that disclosures will be mandatory for large companies by 2022," they said.
The committee urged the government to "do more to prevent the 'tragedy of the horizon' by ensuring that financial institutions, businesses and regulators factor long-term environmental risks like climate change into financial decision making".
According to the report, implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TFCD) would put climate change on boardroom agendas and provide companies and investors with the information to take a longer-term perspective when it comes to the potential risks and opportunities it poses.
Given the long time-scales and large sums of money involved in the management of pension funds, it is important that climate risk reporting applies equally to asset owners (such as pension funds) and their investment managers, not just listed companies as the government has suggested, it said.
Requiring asset owners to report would ensure that trustees and investment managers actively engage with how companies are managing climate change risks, it added.
"The full range of financial entities listed by the TCFD should be making climate-related financial disclosures. We need to see a 'green thread' running through the investment chain.
"This would ensure that climate risks and opportunities are considered at every point in the investment chain. The Government should set out in its response to this report what specific actions it will take to encourage take-up," the MPs said.
The committee called on the government to set a deadline that it expects all listed companies and large asset owners to report on climate-related risks and opportunities in line with the TCFD recommendations on a comply or explain basis by 2022.
The statement comes on the same day a total of 288 global investors, with $26 trillion in assets under management, urged governments to step up their ambition and action to achieve the goals of the Paris Agreement, support investment in the low carbon transition, and improve climate-related financial disclosures.
(Anadolu Agency, 05/06/2018)
