Many large and mid-cap companies worldwide (72%) do not acknowledge the financial risks of climate change in their annual financial reports, according to the KPMG Survey of Corporate Responsibility Reporting 2017.
Of the minority that do acknowledge climate-related risk, less than one in 20 (4%) provides investors with an analysis of the potential business value at risk, KPMG said. The survey studied annual financial reports and corporate responsibility reports from the top 100 companies by revenue in each of 49 countries: a total of 4,900 companies.
There were only five countries in the world where a majority of the top 100 companies mentioned climate-related financial risks in their financial reports KPMG said. These were Taiwan (88%), France (76%), South Africa (61%), US (53%) and Canada (52%). In most cases, the report said the disclosure of climate-related risk is either mandated or encouraged in these countries by the government, stock exchange or financial regulators.
Reviewing the results by sector the survey found that companies in forestry & paper (44%), chemicals (43%), mining (40%) and oil & gas (39%) had the highest rates of acknowledging climate-related risk in their reporting. These were closely followed by the automotive (38%) and utilities (38%) sectors. Healthcare (14%), transport & leisure (20%) and retail (23 percent) were the sectors least likely to acknowledge climate risk KPMG said.
The world’s 250 largest companies (G250) were more likely to report on climate-related financial risk KPMG found but there were still companies not providing this information. The survey found that 90% of French-based multi-nationals acknowledged climate-related risk, followed by 61% of German and 60% of UK G250 companies.
Around two thirds of G250 companies in the retail (67%) and oil & gas (65%) industries acknowledged the risk but only around one third (36%) of major financial services firms did so. However, the research found only six G250 companies that have informed investors of the potential financial impact of climate risk through quantification or scenario modelling.
KPMG’s Global Head of Sustainability Services, José Luis Blasco, said: “Our survey shows that, even among the world’s largest companies, very few are providing investors with adequate indications of value at risk from climate change. Our findings support the need for initiatives like the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) that aim to improve corporate disclosure of climate-related risk.
“Pressure on firms to up their game on disclosure is growing by the day. Some investors are already taking a hard line approach to demanding disclosure; some countries are considering regulation to mandate it; and some financial regulators have warned that failure to identify and manage climate risk is a breach of a board’s fiduciary duty. In this context, we encourage firms to move quickly. Those that don’t could very soon start to lose investors and find the cost of capital and insurance cover escalates quickly.”
KPMG’s research also included reporting on the UN’s Sustainable Development Goals (SDGs). This found that more than one third (39%) of the 4,900 reports studied in KPMG’s survey connected companies’ corporate responsibility activities to the SDGs. That proportion rises to 43% when looking specifically at the G250 companies.Last Updated: 13 October 2017