The Financial Times is reporting that a study of more than 100 global companies revealed that considerations of climate risks were omitted in 70% of the companies' reporting. Auditors did not do a good job of catching the shortcomings either. As FT is reporting:
Auditors rarely noted these discrepancies, even in cases of “considerable observable inconsistencies,” it added. The review “left us wondering whether these considerable risks are actually being accounted for. That’s a big deal,” said Barbara Davidson, the report’s lead author.
The risk was that investors “can’t make effective capital allocations decisions”, since companies may be overstating assets or understating liabilities, said Morgan Slebos, director of sustainable markets at the UN’s Principles for Responsible Investment.
BMW, for example, did not explain in its 2020 financial statements whether or how climate-related issues, such as the phaseout of the internal combustion engine, affected the stated value of certain assets, for example, the large fleet of polluting vehicles it leases out.
Reporting on the climate risk your company is exposed to may be vital information to your investors. Assessing climate risk to your operations is also required in order to be compliant with the EU Taxonomy.
Information on how you should assess for climate risk, and what risks should be assessed for, can be found in the EU Taxonomy documentation.
Climate risk assessment is a part of Celsia Taxonomy.