LONDON May 23 Companies' disclosure of risks to
their business from climate change could become mandatory in a
few years as investor pressure gathers pace, climate finance
experts said on Tuesday.
Investors have urged companies, particularly those operating
in the oil, gas and coal sectors, to disclose the financial
impact of long-term climate change and increase transparency as
the world shifts away from fossil fuels.
"I think we are moving towards the disclosure of climate
change risks and stress testing of investments by companies.
That is something which is gaining traction," John Roome, senior
director of climate change at the World Bank, told an FT climate
finance summit in London.
"We are now in the voluntary stage but I suspect that in a
few years we may very well see standardised requirements from
various regulatory authorities on disclosure of climate risk,"
Last year, a global task force set up by the G20's Financial
Stability Board proposed that companies disclose in their public
financial findings how they identify and manage risks to their
business from climate change.
Although the measures are voluntary, there are calls for
them to become mandatory. This could happen in a few years and
further ahead, prudential requirements could be placed on
potential stranded assets, Roome said.
Last year, institutions managing trillions of U.S. dollars
of assets called for oil majors Exxon Mobil and Chevron
to disclose the impact of curbing global temperature
rise on their businesses, although shareholders narrowly voted
against resolutions calling for such stress tests.
Investors are also pushing oil giant Royal Dutch Shell
to explain the finer details of its plan to link
executives' bonus pay to lowering carbon emissions.
However, there are a number of financial regulators who
argue that climate risk is not part of companies' core business,
Environmental lawyer Alice Garton at ClientEarth said
existing laws apply to company disclosure where climate risks
are material, or affect the economic decisions of shareholders.
There have already been lawsuits in the United States
against Exxon Mobil and coal miner Peabody Energy Corp over
disclosures related to climate change.
ClientEarth said it had written to energy company BP,
miner and trader Glencore and investors this week
warning of the risk of investor lawsuits based on statements
about future fossil fuel demand in their reporting.
"It is highly likely that more cases like Peabody and Exxon
arise in the future. Class action lawyers have become very
clever at developing these cases for profit," said Garton,
company and financial project leader at ClientEarth.
(Reporting by Nina Chestney; editing by Susan Thomas)