LONDON: Investors are pushing major European companies to make sure the “missing” costs of climate change are properly reflected in their financial statements, a move that could wipe billions of dollars off the value of sectors from energy to aviation.
The European and U.S. investors, who manage $9 trillion in assets, have sent 36 carbon-heavy companies a document setting out how they should account for the likely impact of the 2015 Paris climate accord on their future profits.
The investors suspect that existing balance sheets rest on assumptions over variables such as oil prices, carbon taxes, and the lifespan of fossil fuel assets that are incompatible with a shift to net-zero carbon emissions under the Paris deal.
JPM Morgan Asset Management (part of JP Morgan Chase & Co JPM.N), DWS DWSG.DE, Fidelity International and M&G Investments MNG.L were among 38 asset managers to back the document, according to a copy of an accompanying letter shared with Reuters by the Institutional Investors Group on Climate Change, an industry coalition.
In a statement published on Monday, the investors called on the companies to “address missing climate change costs in financial accounts”.
“Either we get serious and start shifting capital flows towards activities aligned with the Paris Agreement, or we continue to talk about it,” said Natasha Landell-Mills, head of stewardship at London-based asset manager Sarasin & Partners, who wrote the 23-page investor expectations document.
“Paris-aligned accounts are amongst the most important changes that will drive system-wide capital redeployment,” Landell-Mills said.
Among the companies the investors wrote to were Germany’s E.ON EONGn.DE and Uniper UN01.DE, Spain’s Iberdrola IBE.MC and Endesa ELE.MC, France’s Air Liquide AIRP.PA, Austria’s OMV OMVV.VI and London-listed Anglo American AAL.L.
When contacted for comment, the companies variously referred Reuters to existing commitments on sustainability and climate risk disclosure, emphasised they welcomed investor engagement, and said they needed time to study the requirements.
The campaign builds on a previous initiative led by Landell-Mills and an initial core of investors to challenge European oil majors and their auditors over their accounting assumptions in light of the Paris deal. – PNP
