Big oil and big coal hide climate risks from investors
Fossil fuel companies recognise climate risks but fail to disclose them to investors – report
Blueandgreentomorrow.com, October 14th, 2014
A new survey from Carbon Tracker has revealed that while companies are well aware of the impacts of climate change and the effects carbon-cutting policies will have on fossil fuels reserves, only 7% integrate the risks into corporate project and capital expenditure assessments.
The survey, led in partnership with CDP, Ceres and the Climate Disclosure Standards Board (CDSB), analysed disclosures of 81 fossil fuel companies that had already answered questions on climate change in questionnaires by the CDP – formerly Carbon Disclosure Project.
The new report found out that while 99% of sampled firms recognise climate change poses risks to their business, only 7% of them properly provide investors with data on possible stressed scenarios and vulnerability of future reserves.
Economists and financial experts have often warned over the risk of "stranded assets" – in case climate policies are put in place to avoid a dangerous warming of more than 2C. This would mean many identified oil, gas and coal reserves would have to remain underground.
Founder and executive director of the Carbon Tracker, Mark Campanale said, “Governor of the Bank of England, Mark Carney, acknowledged last week that the majority of oil reserves are 'unburnable' and that when it comes to the environment, there is a ‘tragedy of horizons.
“To ensure financial actors look more to the long-term on these matters, regulators must increase scrutiny on how climate risk is properly disclosed by listed fossil fuel companies, the most affected sector.”
Paul Simpson, CEO at CDP added, “Stranded assets present a material risk to the global economy which has parallels with the risks that precipitated the financial crisis in 2008. Institutional investors need better disclosure from fossil fuel companies on the potential of their reserves to be stranded and details of how they intend to respond to this risk.
“Given that current accounting rules do not require this, institutional investors and financial market regulators must also take urgent action to ensure this risk is assessed, disclosed and managed.”
The report suggests that companies report on the carbon emissions potential of their coal, oil and gas reserves and resilience plans in a low price and demand scenario, while regulators should also demand the disclosure of more detailed information on how companies intend to act in a 2C warming scenario.