Institutional investors unsatisfied with public companies’ climate disclosures: survey

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Inspector investigating financial documents © Igor Stevanovic / 123RF Stock PhotosA majority (59 per cent) of global institutional investors said they’re dissatisfied with publicly traded companies’ climate-related disclosures, according to a new survey by the Global Sustainable Investment Alliance.

The survey, which polled investors in Australia, Canada, Europe, Japan, the United Kingdom and United States, found 40 per cent of respondents described themselves as somewhat dissatisfied with disclosures, while a further 19 per cent said they’re very dissatisfied. A quarter (25 per cent) said they feel neutral and 16 per cent said they’re somewhat satisfied.

Breaking it down by region, 77 per cent of U.S. respondents said they’re very or somewhat dissatisfied, while 60 per cent of Australian investors felt the same. A quarter of both Canadian and European investors said they’re somewhat satisfied. No investors said they’re very satisfied.

The findings stand out in contrast to the number of global companies that have signalled their support for the Financial Stability Board’s task force on climate-related financial disclosures, which made recommendations in 2017 on how companies should identify and disclose information about their climate-related financial risks and opportunities that would help investors make decisions. As of September 2019, the report noted, nearly 900 companies worldwide have declared support for the TCFD recommendations.

The survey also found 87 per cent of global institutional investors said they don’t believe public markets are consistently and correctly pricing climate risks when evaluating companies and sectors.

“This mispricing points to the potential for an abrupt and disorderly re-valuation of assets as these risks are realized,” the report said. “By disclosing climate-related risks and opportunities, and providing transparency about how they are being managed, organizations that report in line with the TCFD recommendations are providing investors with decision-useful information that, when incorporated into investment analysis, could help facilitate a smoother transition.”

Survey respondents were asked if they had incorporated the disclosures into their investment analysis. About a third (34 per cent) said they’ve already done so, while 26 per cent said they plan to by the end of 2020 and nine per cent said they plan to after 2020. Just a quarter said they have no plans to incorporate the disclosures.

Institutional investors in Australia, the U.K. and the U.S. were most likely to have already incorporated the disclosures into their analyses. A quarter (25 per cent) of Canadian investors said they’ve done so, though an additional 31 per cent said they plan to by the end of next year.

Just 16 per cent of respondents said they report in line with the TCFD recommendations. An additional 19 per cent plan to begin reporting work in 2020, while 28 per cent are exploring the possibility. Almost a third (31 per cent) said they aren’t reporting and have no plans to do so.

Six in 10 (59 per cent) investors said they consider the TCFD recommendations somewhat helpful, while 34 per cent call them very helpful. In addition, almost half (48 per cent) said they somewhat agree with the statement that the TCFD would help investors limit the global average temperature rise to less than two degrees Celsius. And a further 19 per cent said they strongly agree.

This article originally appeared on CIR’s companion site, Benefitscanada.com. Read the full story here.

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