Some 34 investors representing $7.1trn in assets have warned Europe’s largest companies they may increase voting against audit committee chairs if climate expectations continue to go unmet.
Ahead of this year’s company AGMs, members of the Institutional Investors Group on Climate Change (IIGCC), including BMO, Rathbones and Sarasin & Partners, have written to 17 companies including BP, Glencore and Volkswagen to ask why expectations over climate-related accounting disclosures have failed to be met.
Vicki Bakhshi, director, responsible investment, BMO GAM (EMEA), part of Columbia Threadneedle, said: “Although some companies have started to integrate climate considerations into their accounting disclosure, we are a long way from seeing consistent 1.5°C-aligned accounts, which is why we have supported this latest round of letters to boards.”
The letters follow ones sent in November 2020 and highlight that boards have been “unable to make the requested disclosures” since then. The November letters set out five expected disclosures, a confirmation they would be looking to reduce emissions, and to include climate risks in financial statements.
“Having now reviewed your 2020 Financial Statements in some detail, we are keen to understand why the audit committee has felt unable to provide the requested disclosures,” today’s letters read.
“We lack the required visibility to give us confidence that the economic impacts from climate change and associated policy action are being properly accounted for. We have little understanding of how [company]’s financial position might be impacted be accelerating decarbonisation associated with a 1.5°C pathway.”
Stephanie Pfeifer, CEO, IIGCC, said: “How can companies who are fundamentally intertwined with the long-term fallout of climate change, such as those in the fossil fuel industries, be missing such a material risk in their financial reporting? Investors are waking up to this question and appear increasingly prepared to use their votes in reappointing audit committee directors to make their point.”
Matt Crossman, stewardship director, Rathbones Group and ESG Clarity Committee member, added: “We can’t rely on ‘business as usual’ accounting assumptions as the energy transition unfolds. Along with our commitment to be a net zero investor, ensuring company accounts are aligned to a 1.5°C degree future is a crucial first step.”
The group added the ‘Big Four’ audit firms have also been contacted separately in recent months in the UK, US and France with investor expectations on climate accounting.
The 17 companies that received letters were: Air Liquide, Anglo American, Arcelor Mittal, BMW, BP, CRH, Daimler, Enel, Equinor, Glencore, Renault, Rio Tinto, Saint-Gobain, Shell, ThyssenKrupp, TotalEnergies and Volkswagen.
