Investors implore banking firms to champion climate disclosure

More than 100 investors with $1.8trn under management have written to the chief executives of 60 of the world's largest banks, including HSBC and Bank of America, calling for better disclosure and implementation on climate risks in their investment portfolios.

The group of pension funds, asset owners and managers such as Hermes have called for more robust climate-related disclosure to be supplied from banks to investors on areas such as strategy and implementation, public policy engagements and collaborations with other actors on climate change.

The letter, coordinated by investment non-profit ShareAction and the Boston Common Asset Management team, implores banks including New Zealand Banking Group, Bank of America, Deutsche Bank, HSBC Holdings, JP Morgan Chase, Mitsubishi UFJ Financial Group, Inc. and TD Bank to play an essential role in meeting the goals of the Paris Agreement by aiming investment towards low-carbon products and services.

ShareAction’s chief executive Catherine Howarth said: “Millions of people have an interest in how these banks respond to climate change, whether as citizens affected by the frightening physical impacts we hear about almost daily now in the news, as pension savers whose funds invest in these banks, or indeed as customers of these banks.

“We are hugely encouraged that this substantial group of global institutional investors has come together to press banks for meaningful action on climate-related risks and opportunities.”

The investors are seeking information on how banks and senior executives are managing climate-related risks and opportunities. A recent study estimates that portfolio value will fall between 5% and 20% based on business-as-usual scenarios regarding climate mitigation.

Task Force

The desire for better climate-related disclosure has been driven by the recent issuance of recommendations by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

The TCFD is a voluntary framework to align climate-related risks with financial filings. Fortunately, more than 100 businesses including Unilever, Barclays and HSBC, have publicly committed to support the final recommendations.

However, it is believed that $93trn of investment is required by 2030 to limit global warming to two degrees in line with the Paris Agreement. Eleven of the world’s top banks representing more than $7trn, have pledged to develop analytical tools and indicators to strengthen their assessment and disclosure of climate-related risks and opportunities as part of the TCFD recommendations.

Hermes EOS’s associate director of engagement Roland Bosch said: “In light of the recently issued recommendations of the TCFD, investors are seeking better disclosure from companies in sectors particularly exposed to climate change and global efforts to reduce emissions. We believe that the banking sector can do more to expand its disclosure of how climate risks and opportunities are being assessed and managed.”

Earlier this year, the world’s largest investor Blackrock warned that high-level directors could be voted out of companies that are failing to mitigate climate-related risks posed to individual firms.

Matt Mace

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