KPMG: Three quarters of businesses not acknowledging climate-related risks
Despite investors ramping up the pressure on the corporate disclosure of climate-related risks, nearly three quarters of large and mid-cap companies don't acknowledge the financial risks of climate change in their annual financial reports.
That’s according to a new report from KPMG which reviewed corporate responsibility and sustainability reporting form 4,000 companies in 49 countries and regions. It found that of the minority that do acknowledge climate risk, very few attempt to quantify or model the business value at stake.
The authors highlight that these findings support the need for initiatives such as the Task Force on Climate-related Financial Disclosures, the voluntary framework which encourages businesses to align climate-related risks with financial filings.
KPMG’s Global head of sustainability services José Luis Blasco said: “Our survey shows that, even among the world’s largest companies, very few are providing investors with adequate indications of value at risk from climate change.
“Pressure on firms to up their game on disclosure is growing by the day. Some investors are already taking a hard line approach to demanding disclosure; some countries are considering regulation to mandate it; and some financial regulators have warned that failure to identify and manage climate risk is a breach of a Board’s fiduciary duty. In this context, we encourage firms to move quickly. Those that don’t could very soon start to lose investors and find the cost of capital and insurance cover escalates quickly.”
Companies are under increasing pressure to disclose by investors worried that the next financial crash could be climate-related. Indeed, 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.
But the KPMG survey noted only five countries, including Taiwan, France, South Africa, US and Canada where a majority of top 100 companies mention climate-related financial risks in their financial report. In the UK, almost two-thirds of FTSE 100 companies do not report the risk of climate change in their annual reports.
The picture is mixed across the sectors; businesses in the forestry & paper (44%), chemicals (43%), mining (40%) and oil & gas sectors (39%) have the highest rates of acknowledging climate-related risk in their reporting, while healthcare (14%), transport & leisure (20%) and retail (23%) are the sectors least likely to acknowledge climate risk.
The survey also explored further trends in corporate responsibility reporting including reporting on the UN’s Sustainable Development Goals (SDGs). According to KPMG, the SDGs have resonated strongly with businesses worldwide in less than two years since their launch – 39% are linking corporate responsibility activity to the Goals. KPMG claims this trend strongly suggests that the SDGs will have a growing profile in CR reporting over the next two to three years.
Human rights, meanwhile, is firmly on the agenda as a global business issue, the survey found. Just under three quarters (73%) of respondents now acknowledge the issue of human rights. However, the report notes a lack of a public human rights policy at many companies, suggesting there is still work to do.