Climate changes for IR managers

Jun 11, 2018
Companies including Amazon, Facebook and Netflix challenged to improve climate reporting

Last week was World Environment Day and it saw many leading companies – including tech giants Amazon, Netflix and Facebook – challenged by California Governor Jerry Brown, UN climate change chief Patricia Espinosa and Mahindra Group CEO Anand Mahindra to start reporting environmental data by the start of the landmark Global Climate Action Summit (GCAS) being held this September. 

Many investor relations professionals will be well used to such requests for environmental reporting. A majority (55 percent) of companies worldwide (by total market cap) now report environmental data in areas such as greenhouse gas emissions or water use. More than 6,300 companies (and 570 cities) currently report environmental data through CDP, the world’s largest environmental disclosure platform.

In the US, for example, despite President Donald Trump’s unilateral withdrawal from the Paris Agreement exactly a year ago, American companies are taking climate disclosure more seriously than ever. The US has the most companies on the 2017 CDP ‘A List’, which names the world’s businesses leading on environmental performance. And of the 134 global corporates that have committed to sourcing 100 percent of their electricity from renewables through the RE100 initiative, 45 are based in the US.

A tipping point has been reached

It’s remarkable to reflect that companies not disclosing environmental data now find themselves in a minority. One of the catalysts for this in the last year has been the work of the Task Force on Climate-related Financial Disclosures (TCFD) backed by financial heavyweights Mark Carney and Michael Bloomberg. TCFD has changed the landscape for companies and put climate risk management clearly on the agenda of boards around the world.

In just one year, more than 250 companies with a combined market cap of more than $6.6 tn (including 160 financial firms responsible for assets of more than $86.2 tn) have publicly expressed support for the TCFD framework. In addition, major investors such as Amundi, BlackRock and Citigroup all back TCFD and, like the companies in their portfolios, will be reporting on how they deal with climate-related governance, strategy and risk management – all of which are growing in importance to pension funds and other asset owners. 

A clear sign that the ball is in motion came last December, when the global head of investment stewardship at BlackRock sent letters to the corporate governance teams of more than 120 companies urging them to assess the risks posed by climate change to their business operations, in line with TCFD recommendations. 

Meanwhile, shareholders are also increasingly calling for greater disclosure, with a rising number of resolutions being put forward as the financial community starts to become concerned about the material financial risks posed by climate change. Time is ticking and urgent action needs to be taken to prevent the Paris Agreement from moving beyond our grasp. More corporations and IR managers need to do their part and step up now to address TCFD in a manner that meets investors’ requirements.

Disclosure back in the spotlight

The fact is that you can’t manage what you don’t measure. That’s why last week, the co-chairs of the GCAS, which will be held in California in three months’ time, issued the Universal Climate Disclosure Challenge. 

This sets a goal of having at least 300 more companies, cities, states and regions publicly disclose their carbon emissions and reduction efforts by the time of the summit. Further down the road, the challenge calls for universal and standardized reporting by all governments and entities worldwide by 2030.

The case for disclosure

With an eye on the bottom line, the question quickly emerges: why should companies and IR managers take heed of the disclosure challenge? The simple answer is that it is in companies’ and their stakeholders’ best interests to do so. Every investor knows that the more comprehensive and consistent the information, the better the ability to make informed decisions when building a portfolio. This is particularly true when it comes to effectively measuring companies’ exposure to climate change and managing the resulting challenges and opportunities.

All companies, especially high-profile ones, need to show they are managing climate risk.  It’s up to IR managers to help companies rise to the challenge and show how their company is future-proofing itself as the climate – and the wider economy – changes. 

Lance Pierce is president of CDP North America

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