Local weather accounting voices for 17 large European companies

LONDON: Thirty-four traders managing greater than US$7 trillion (RM29.5 trillion) in belongings have warned 17 of Europe’s largest firms, together with BP and Volkswagen, that they may problem board administrators over their accounting of local weather dangers.

The transfer is the most recent push by traders to strain firms and their auditors, charging them with not shifting quick sufficient to adapt to the world’s transition to a low-carbon financial system or being clear sufficient concerning the potential impacts.

In letters despatched between December and February and seen by Reuters, the traders advised the businesses their accounts didn’t replicate the fallout from local weather change on their belongings and liabilities.

For instance, some belongings might depreciate sooner in worth whereas demand for sure merchandise might fall.

The necessity for sooner motion to cap world warming at 1.5°Celsius and mitigate its worst extremes was repeated by United Nations (UN) local weather scientists in a landmark report.

“Buyers can’t perceive the true worth of an organization with out understanding the embedded local weather dangers,” Natasha Landell-Mills, accomplice and head of stewardship at funding supervisor Sarasin & Companions, one of many signatories to the letters, stated in an interview.

Others to signal embrace the fund arm of HSBC, French public pension scheme ERAFP, and BMO International Asset Administration EMEA, a part of United States asset supervisor Columbia Threadneedle.

Buyers have tried to press the businesses on the problem earlier than. In 2020, by way of the Institutional Buyers Group on Local weather Change (IIGCC), they laid out a collection of steps boards wanted to take to align their accounts with the Paris Settlement on local weather, together with altering key accounting assumptions.

The traders discovered that almost all firms didn’t adequately reply, prompting the most recent string of letters warning boards they confronted opposition at their upcoming AGM.

“From the subsequent voting season it is best to more and more anticipate to see traders vote towards audit committee administrators’ reappointment, the place high-risk firms fail to satisfy the expectations,” the letters stated.

Shareholder votes may be forged towards firms’ resolution to retain their auditors or a request to approve their monetary statements, Landell-Mills stated.

Air Liquide, Anglo American, Arcelor Mittal, BMW, Daimler, Enel, Equinor, Glencore, Rio Tinto, Saint-Gobain, Shell, Renault, CRH, ThyssenKrupp and TotalEnergies additionally acquired letters.

The letters have been copied to the businesses’ lead audit companions.

Individually, the traders additionally contacted the biggest accountants in Britain, the US and France over the problem.

Landell-Mills stated votes could be influenced by the most recent annual experiences, and that Sarasin had determined to vote towards the monetary assertion and auditor at Rio Tinto’s, and abstain on whether or not to reelect the audit committee’s chair.

She added she was happy to see Shell embrace a “sensitivity evaluation” within the notes to its accounts, launched after the letter had been despatched, that confirmed impairments may hit US$27bil to US$33bil (RM113.9bil to RM139.2bil) based mostly on common costs from 4 1.5°C to 2°C local weather change eventualities.

Landell-Mills stated she nonetheless needed to know what a pure 1.5°C situation would imply for impairments.

Air Liquide and Saint Gobain each stated they have been liaising with the IIGCC, a European membership physique for traders collaborating on local weather change, and that local weather dangers have been factored into their accounts.

Anglo American stated it was participating with IIGCC.

Mercedes Benz, previously Daimler, stated it was in “fixed and constructive” dialogue with the traders and would replace its sustainability technique on April 11.

Equinor referred to its vitality transition plan as being on a Paris-aligned pathway.

Enel stated it might not touch upon talks with shareholders.

Glencore declined to touch upon the letter, however its 2021 annual report incorporates a sensitivity evaluation.

ThyssenKrupp shared a letter despatched in reply to IIGCC member Rathbones Funding Administration through which it stated it understood traders’ want for extra detailed info and was “presently inspecting how we might implement your inquiry”.

The remainder of the businesses didn’t reply to requests for remark.

Whereas many firms have pledged to get to net-zero emissions and are underneath rising strain from regulators to reveal their efforts, the bulk have but to align their enterprise practices, together with their accounts, with the objective, the traders say.

“We won’t depend on ‘enterprise as standard’ accounting assumptions because the vitality transition unfolds.

“Together with our dedication to be a net-zero investor, making certain firm accounts are aligned to a 1.5°C diploma future is a vital first step,” stated Matt Crossman, stewardship director at Rathbones. — Reuters


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