British fund industry warns companies on climate risk

LONDON (Reuters) - Britain’s investment industry trade body has warned companies ahead of their 2020 annual general meetings that they must disclose more about how they are handling climate change risk.

FILE PHOTO: Pedestrians walk over the Millennium Bridge in view of skyscrapers in the financial district in London, Britain February 17, 2020. REUTERS/Simon Dawson/File Photo

It wants companies to explain in their annual report the impact climate change will have on their business model and how these risks are being measured and managed, echoing comments from incoming United Nations climate envoy Mark Carney.

“Climate change could result in a significant loss of value in companies if risks are not effectively measured and managed, ultimately hitting savers’ pockets,” the Investment Association’s Director for Stewardship and Corporate Governance Andrew Ninian said in a statement.

The Investment Association, whose members manage 7.7 trillion pounds ($9.88 trillion) and own around a third of British companies, said insight was needed to better understand the steps taken to preserve businesses over the long-term.

Carney, currently governor at the Bank of England, is leading efforts to accelerate the corporate and political response ahead of climate talks in Glasgow in November.

Ninian said the IA’s members wanted to see climate change was being taken seriously in boardrooms.

“Companies need to be looking at the impact of climate change on their business, products and strategy and set out to investors how they are responding to these risks,” he said.

The IA’s voting advisory service IVIS, which helps members decide how to vote at each company’s annual general meeting, the bulk of which will be held in the next few months, would track each company’s progress.

IA members wanted to see “significant” movement towards reporting in line with the Task Force for Climate-related Financial Disclosures (TCFD) recommendations by 2022, it said.

“This will see companies reporting on climate-related risks in a consistent, clear and comparable manner, enabling investment managers to make better informed investment decisions.”

The TCFD, championed by Carney, is a risk-assessment framework launched by the Financial Stability Board in 2015 to develop recommendations on climate-related disclosures.

(This story corrects to show Carney still BoE governor, paragraphs 2 and 5.)

Reporting by Simon Jessop; Editing by Alexander Smith