Major companies fail to account for climate risks

Chevron, ExxonMobil, BMW, and Air France-KLM among those not fully ‘accounting for climate-related risks’

September 24, 2021

Over 70% of listed, high-polluting companies around the world failed to adequately account for climate-related risks in their financial statements last year, according to research coordinated by the Climate Accounting Project (CAP) and issued by Carbon Tracker.

Despite net-zero pledges, on the list are names including Chevron, ExxonMobil, BMW, and Air France KLM. The research found that 80% of auditors did not assess companies’ climate risks when carrying out auditing duties.

The study – Flying Blind: The glaring absence of climate risk in financial reporting – reviewed the 2020 statements of 107 companies, including 94 on the Climate Action 100+ focus companies, a group containing 167 companies that account for 80% of corporate industrial greenhouse gas emissions.

“It is disappointing to see companies acknowledge that the energy transition is likely to adversely impact their results, to have their auditors identify forward-looking assumptions as critical audit matters subject to significant uncertainties, and yet see little to no disclosure about the assumptions underpinning the accounts…” said Rob Schuwerk, executive director at Carbon Tracker North America and co-author of the report, “much less an understanding of how management and auditors believed those assumptions to be reasonable,” he added.

On 14 September, a group of global investors representing over $2.5tn in assets under management, sent a letter to the UK minister responsible for COP26, Alok Sharma, requesting his support for a position paper calling for governments to mandate companies to produce accounts that consider the global transition to low carbon energy in line with the Paris Agreement.

The group also requested for pressure to be placed on auditors to “call out” parties that fail to do so.

This came after calls in 2019 and 2020 from the International Accounting Standards Board and the International Auditing and Assurance Standards Board, respectively, clarifying that material climate-related risks should not be ignored in audits or accounts.

The study also found a “lack of consistency” across company reporting, with 72% leaving out evidence of addressing emissions targets in statements.

Of the 107 companies, 41% are in the UK and Europe, and 37% are in the US/Canada.