Investors need to understand how climate-related risks and opportunities affect companies’ future cash flows and assets and liabilities, according to a new high-powered international task force led by former New York Mayor Michael Bloomberg.
The organization, called the Task Force on Climate-Related Financial Disclosures, offered broad recommendations Wednesday for companies making climate risk and opportunity disclosures.
Its report said the disclosures need to go beyond minimum compliance requirements. Former Securities and Exchange Commission Chair Mary Schapiro said these voluntary standards are likely to become best practices.
“It is critical that financial institutions begin to explore their
exposure to climate-related risks and assess how that exposure may change over time and under different conditions,” said Schapiro, a consultant to the task force and the vice chair of the advisory board for the regulatory consulting firm Promontory Financial Group.
Schapiro said the report will lead to an improvement in the current lack of quality and quantity in climate risk reporting.
Other members of the task force, established by the Financial Stability Board, include climate change experts from BlackRock, Moody’s, KPMG, Mercer, Deloitte, Ernst & Young and other financial companies and financial consulting firms.
The group stresses that large asset managers sit at the top of the investment chain and therefore have an important role to play in influencing the organizations in which they invest to provide better climate-related financial disclosures.
They added that disclosures by asset managers and asset owners could foster an early assessment of climate-related risks and opportunities and improve pricing of climate related risks.
The group’s recommendations for climate reporting focused on broad guidelines for governance, strategy and risk management.
In governance, the task force said disclosures should tell how board members monitor progress on targets for addressing climate change issues.