Three-quarters of companies worldwide yet to acknowledge climate change as a financial risk
Almost three-quarters (72 per cent) of large and mid-sized companies worldwide do not acknowledge the financial risks of climate change in their annual financial reports, according to the KPMG Survey of Corporate Responsibility Reporting 2017.
Of the minority that do acknowledge climate-related risk, less than one in 20 (4 per cent) provides investors with analysis of the potential business value at risk.
KPMG’s survey studied annual financial reports and corporate responsibility reports from the top 100 companies by revenue in each of 49 countries, a total of 4,900 companies.
It found only five countries in the world where a majority of the top 100 companies mention climate-related financial risks in their financial reports: Taiwan (88 per cent), France (76 per cent), South Africa (61 per cent), US (53 per cent) and Canada (52 per cent). In most cases, disclosure of climate-related risk is either mandated or encouraged in these countries by the government, stock exchange or financial regulator.
In terms of industries, companies in the forestry and paper (44 per cent), chemicals (43 per cent), mining (40 per cent) and oil and gas sectors (39 per cent) have the highest rates of acknowledging climate-related risk in their reporting. They are closely followed by the automotive (38 per cent) and utilities (38 per cent) sectors. Healthcare (14 per cent), transport and leisure (20 per cent) and retail (23 per cent) are the sectors least likely to acknowledge climate risk.
When looking specifically at the world’s 250 largest companies (G250), public acknowledgment of climate-related financial risk is more common but still far from universal. French-based multinationals lead with 90 per cent acknowledging climate-related risk, followed by majors headquartered in Germany (61 per cent) and the UK (60 per cent).
Around two-thirds of G250 companies in the retail (67 per cent) and oil and gas (65 per cent) industries acknowledge the risk but only around one-third (36 per cent) of major financial services firms do so. However, the research found only six G250 companies that have informed investors of the potential financial impact of climate risk through quantification or scenario modelling.