British companies, pension funds may have to report climate risks

LONDON (Reuters) - British public companies and pension funds may have to publish by 2022 what risks their businesses face from climate change under a new so-called green finance strategy.

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Britain last week became the first G7 country to sign into law a requirement to reach net zero emissions by 2050 and the green finance strategy, published on Tuesday, sets out plans to increase investment in sustainable projects and infrastructure.

The government paper builds on disclosure on climate risks set out by the G20 Task Force on Climate-related Financial Disclosures.

The government report said the financial sector needed be at the heart of changes required to meet the net zero emissions goal.

“The re-allocation of tens of trillions of dollars of capital towards green investment offers the potential to reshape cities, energy systems and land use around the world. The nature of this investment ... will determine the future of our climate,” the report said.

“This includes setting expectations for publicly listed companies and large asset owners to disclose by 2022 how climate change risk impacts their activities.”

It said it would work with regulators to decide whether mandatory disclosures, rather than the current voluntary system, was needed.

The climate risks include potential “stranded assets” of fossil fuel companies which may not be able to burn all their oil, gas or coal resources if carbon emissions are limited. Insurance companies have also warned of the risk of claims relating to increased extreme weather damage from floods or hurricanes.

Many investors have called on companies to provide better communication on how climate change could impact their businesses, amid concerns that assets are being mispriced because the full scale of the risk is not being factored in.

The overall share of the market capitalisation of mining and oil and gas stocks in Britain's blue-chip FTSE 100 index .FTSE is about 17%.

More than 200 of the world’s largest listed companies have forecast that climate change could cost them a combined total of almost $1 trillion, a report by charity group Carbon Disclosure Project showed last month.

The G20’s Task Force on Climate-related Financial Disclosures launched its voluntary framework in 2017 that calls on companies to provide climate-related financial disclosures in their public annual financial filings.

The task force published its second status report last month, showing 785 companies and organisations, with a combined market capitalisation of more than $9.2 trillion, had committed to support the framework.

Companies supporting it included insurance groups AXA AXAF.PA and Aviva AV.L, oil companies Royal Dutch Shell RDSa.L and Total TOTF.PA and mining companies Anglo American AAL.L and BHP BHP.AX.

Reporting By Susanna Twidale. Additional reporting by Helen Reid. Editing by Jane Merriman