Mark Carney: businesses must come clean about climate change risks to avoid "tragedy"

Firms must discuss the impact of specific climate change scenarios in their financial statements to ensure transparency, report says

Ben Chapman@b_c_chapman
Wednesday 14 December 2016 18:30
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Speaking in his role as Chair of the Financial Stability Board, mark Carney urged companies to open up about the risks they face from climate change
Speaking in his role as Chair of the Financial Stability Board, mark Carney urged companies to open up about the risks they face from climate change

Mark Carney backed a raft of new measures to ensure businesses and investors do more to combat the “tragedy” of climate change.

The recommendations, published by an international task force headed by billionaire New York City mayor, Michael Bloomberg, said investors need more information about the risks companies face from global warming so they can properly allocate funds.

Companies have hidden the true extent of the threat posed to their operations from global warming, rising sea levels and increasingly extreme weather patterns, the task force said. Analysts have said that this leads to an overvaluing of carbon-intensive fossil fuel companies.

“Warming of the planet caused by greenhouse gas emissions poses serious risks to the global economy and will have an impact across many economic sectors,” Mr Bloomberg said. “But until now, it has been difficult for investors to know which companies are most vulnerable to climate change, which are best prepared and which are taking action.”

Mr Carney said: “This must change”.

Firms must discuss the impact of specific climate change scenarios in their financial statements to ensure transparency, the report said. It also recommended they model the impact on a movement to a low-carbon economy.

The widespread adoption of the task force’s recommendations “will lead to smarter, more efficient allocation of capital, and speed the transition to a low-carbon economy,” Mr Bloomberg added.

The recommendations come a year after 195 countries agreed to work together to limit the rise in average global temperatures to less than 2 degrees Celsius. US President-elect Donald Trump, who has called global warming a "hoax," has said he plans to abandon the US commitment to reduce carbon emissions as part of that agreement.

The task force is composed of executives from major companies, banks and insurance companies, including JP Morgan Chase, BHP Billiton and Swiss Re. The companies represented have a combined market value of $1.5 trillion, while the financial institutions oversee $20 trillion in assets.

The panel developed its recommendations after the G-20 asked it to examine the financial stability risks posed by climate change. The advice focuses on "practical, material disclosures" that can be used by all financial institutions and companies that raise money from investors, Carney and Bloomberg said.

"Of course, given the uncertainties around climate, not everyone will agree on the timing or scale of adjustments required to achieve this goal," Carney said at the report's launch. "But the right information will allow optimists and pessimists, skeptics and evangelists, to back their convictions with their capital."

He also dipped into history to explain his view.

"Early disclosure rules allowed 20th-century financial markets to grow our economies by pricing risks more accurately," he said. "The spread of such standards internationally has helped lift more than a billion people out of poverty. Climate-related disclosures could be as transformative for 21st-century markets."

Additional reporting by AP

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