Posted on Nov 16, 2020 at 8:09 am
At the end of October, at the annual general meeting of Spanish airport manager Aena, its shareholders, supported by activist Chris Hohn of the TCI fund, voted in favor of an action plan against climate change . The cases where pressure from shareholders leads companies to adopt precise objectives in terms of carbon neutrality, energy self-sufficiency or to put themselves in a position to respect the objectives of the Paris Agreement are still rare. But they could well multiply.
Because now, long-term investors, for whom climate change carries significant financial risks, have become accustomed to grouping together to put pressure on the companies in which they are shareholders. Latest initiative to date: the publication by 38 of them (representing 9.300 billion dollars of capital under management), of “Investors’ expectations in terms of accounts aligned with the Paris Agreements. After the call launched by the PRI (Principles for Responsible Investment) in September, the requirements are becoming clearer.
Climate risk fully integrated in financial statements
In this twenty-page note, international asset managers such as JP Morgan AM, Fidelity, Robeco, DWS, Aegon AM or Nordea and large Anglo-Saxon pension funds, ask large companies that concrete financial risks related to climate are fully integrated in their financial statements, and not just in separate extra-financial reporting.
“Publishing financial statements that do not take into account the concrete impacts of climate change amounts to misinforming managers and shareholders and leads to a misallocation of capital”, they write. Investors no longer want companies to be able to report climate risks in their extra-financial reporting while continuing to ignore them in their financial statements.
For investors, it is up to the audit committees to “Detail the measures taken to ensure that significant climate risks are properly taken into account in the accounts and by the external auditors. “
“Zero emission” objective in 2050
Businesses have been warned. The note from the group of institutional investors for the climate (IIGCC) as well as a letter were sent to 36 European giants (more precisely, to their chairman of the audit committee) of energy, materials and transport. Several French groups are among them, in particular EDF, Engie Air Liquide, Arcelor Mittal, Saint-Gobain, PSA and Renault.
According to investors, the groups in question are off to a bad start in achieving the goal of “zero emissions” in 2050. A real call to order. “The recent steps taken by the oil and gas majors BP, Shell and Total to align their financial statements with the Paris Agreement have shown how, even in the most exposed sectors, this was not only doable but it could realized quickly. “