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Bloomberg task force urges private sector to disclose climate risks

Report calls for organizations to routinely disclose potential risks and opportunities climate change poses to their business


 

TORONTO – A high-profile task force is recommending the global private sector do more to disclose the risks climate change pose to their businesses, and what they’re doing to adapt.

“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,” said task force chair Michael Bloomberg in the report released Wednesday.

“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.”

Bank of England governor Mark Carney appointed the prominent American businessman and former New York mayor to chair the task force last December. This was about the time political leaders from nearly 200 countries including Canada were meeting in Paris to sign a United Nations climate accord.

The report calls for organizations to routinely disclose potential risks and opportunities climate change poses to their business, how the risks are identified, the way the risks are measured, and how top managers and boards govern the process.

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The task force also singled out certain sectors, including the oil and gas industry, that could be especially vulnerable to climate change because of constraints on emissions, effects on energy production and usage, and effects on water availability, usage and quality.

“It’s about integrating these disclosures with the rest of the mainstream financial disclosure of a company,” said Stephanie Leaist, who represented the Toronto-based Canada Pension Plan Investment Board on the 32-member Bloomberg task force.

“CPPIB has been engaging with companies around climate change for 10 years now, so (the report) is very consistent with what we’ve been doing for a decade,” Leaist said in a phone interview from London, England.

“I think there’s a role for investors to play in urging adoption of these recommendations.”

Investor activism has already started to have an effect. Shareholders of oilsands giant Suncor were successful in passing a resolution at the company’s annual general meeting in April that called for more disclosure on how it’s assessing and ensuring corporate resilience in a low-carbon economy.

Suncor has since made further disclosure on its emissions intensity reduction targets. But the Bloomberg report recommends especially vulnerable companies like those in the oil and gas industry go further and disclose how climate change could impact revenue, spending, liabilities and long-term capital allocation.

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In Suncor’s most recent annual information form filed in February, the company outlined the many climate change regulations proposed or already in place that it could be affected by. However, the company said it wasn’t possible to predict how they would impact its business, financial condition, results of operations and cash flow.

Cenovus Energy, which like Suncor has been a vocal supporter of carbon pricing, said in its annual disclosures that “it is possible that mandatory emissions reduction requirements may have a material adverse effect on Cenovus’s financial condition, results of operations and cash flow,” but stops short of providing any sort of estimate.

Enbridge adopted a climate change policy in March that committed to reducing emissions and integrating climate risk into business development and risk management strategies, but did not commit to disclosing any financial estimates of the impacts of climate change.

All three companies declined to comment on Wednesday’s report.

Other oil and gas companies have disclosed less on the issue, while the report also called for extended disclosure from a wide range of industries including transportation, construction, utilities, agriculture, real estate and packaged foods.

The report was prepared at the request of the Financial Stability Board, which was created in 2009 by the G20 nations to monitor and make recommendations about the global financial system.


 

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