EXCLUSIVE Investors call for governments to toughen climate accounting -letter

LONDON, Sept 20 (Reuters) – Traders managing greater than $2.5 trillion have referred to as on governments to compel firms and auditors to file monetary accounts aligned with the world’s internet zero emissions goal, a letter seen by Reuters confirmed.

Writing to UK local weather czar Alok Sharma forward of the following spherical of world local weather talks in Glasgow in November, the group mentioned doing so was essential to make clear the monetary impression of local weather change and provides an incentive to speculate accordingly.

Governments ought to mandate a requirement for firms to clarify the monetary penalties of a net-zero pathway and for auditors to name out the place firms have failed to take action, the investor group mentioned within the Sept. 14 letter.

It follows a latest examine by Carbon Tracker and the Local weather Accounting Venture that discovered greater than 70% of the world’s heaviest-emitting firms didn’t disclose the complete dangers of their 2020 disclosures, with 80% of audits displaying no proof the danger had been assessed.

“Most (firms) proceed to make use of assumptions that presume little or no decarbonisation, and thus report monetary outcomes predicated on governments failing to implement their acknowledged commitments and, in some circumstances, authorized targets,” the letter mentioned.

Sharma’s workplace didn’t instantly reply to a request for remark.

The upcoming local weather convention, dubbed COP26, is seen as a very powerful since governments initially struck a deal to restrict world warming in Paris in 2015, with all events now being requested to .

Britain’s accounting watchdog has already warned firms and auditors to do a greater job, whereas world accounting and auditing normal setters have restated the necessity to assess materials dangers, which may embody local weather danger.

Regardless of investor our bodies representing $100 trillion in property calling in September for Paris-aligned accounts, the inaction from firms and auditors meant authorities motion was wanted, the investor group mentioned.

“If we select to attend for firms to answer investor strain, it might take years to ship the numbers we require to spend money on a means that’s aligned with the Paris objectives,” the buyers’ letter mentioned.

Signatories to the letter embody a physique representing British native authorities pensions, Sweden’s AP2 pension scheme and buyers together with Sarasin & Companions, which coordinated the letter and an accompanying place paper, in addition to Candriam and Federated Hermes.

For international locations like Britain, which have made reaching net-zero emissions a authorized obligation, altering the regulation round accounting and auditing can be “totally constant” with different authorities efforts, the investor group mentioned.

The stakes are excessive. Corporations comparable to BP wrote off billions of {dollars} final 12 months after they lowered long-term oil worth assumptions. With out correct accounting, cash wanted to fund the transition to a low-carbon economic system might find yourself within the unsuitable place.

“Accounts that pass over materials local weather impacts misinform executives, shareholders and collectors and, thus, end in misdirected capital,” the investor group mentioned.

Extra reporting by Nina Chestney; modifying by Greg Roumeliotis and Philippa Fletcher

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