Monday, 4 June 2018

Financial Times/Leslie Hook: Mary Creagh: 'We want to see mandatory climate risk reporting'

Financial  Times

Climate change
MPs call for UK companies to disclose climate risks
Six of UK’s largest pension funds have not considered climate change at all
Mary Creagh: 'We want to see mandatory climate risk reporting'

Leslie Hook, Environment Correspondent yesterday
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The UK government should bring in rules within the next four years that require pension funds and UK-listed companies including banks to disclose climate-related risks, a committee of MPs has said.

The Environmental Audit Committee also said the government should immediately clarify existing rules around corporate risk disclosure to include material climate risks.

“We want to see mandatory climate risk reporting and a clarification in law that pension trustees have a duty to consider long-term sustainability, not just short-term returns,” said Mary Creagh MP, chair of the committee.

Last month, the committee published the results of a survey of the UK’s 25 biggest pensions funds, which found that six of them had not considered climate change at all, and only 12 had considered climate change at the board level.

The report comes after growing calls for financial regulators to take a more proactive approach in managing the systemic risks that could be caused by physical changes to the environment, and by changing policies around emissions. 

Christopher Hohn, the activist investor, wrote to the Bank of England last month, warning that information is inadequate for investors about the climate risk exposure of UK banks and companies. He called on the bank to “fix this serious problem”.

“Failing to act risks endangering the long-term stability of the UK banking system. It may also expose banks to litigation for inadequate disclosure under existing law,” wrote Sir Chris.

The UK is already one of the countries that has been spearheading the discussion of how regulation should address risks posed by climate change, which include physical risks from the changing environment, liability risk from climate-related lawsuits, and transition risks posed by the shift away from fossil fuels.

Mark Carney, the Bank of England governor, has been deeply involved in the Task Force on Climate-related Financial Disclosures, an initiative by the Financial Stability Board which he chairs, that has created guidelines for disclosing climate risks.

Those voluntary guidelines, published last year by the TCFD, have already been adopted by asset managers with more than $80tn under management, and there are growing calls — such as Monday’s report from the Environmental Audit Committee — for these disclosures to be made mandatory.

But Mr Carney has refrained from directly advocating mandatory disclosures, saying in April it was “premature” to talk about mandatory disclosures.

“The private sector is now at a place where the very first disclosures are starting to happen . . . there will be a learning process through that,” he said.

The Bank of England is currently undertaking a survey of banks’ climate-related risks, the results of which will be published later this year.
Copyright The Financial Times Limited 2018. All rights reserved.
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