OECD COP21 side event: High-level Panel on corporate climate change disclosure
Introductory remarks by Angel Gurría
Thursday, 10 December 2015
OECD COP21 Pavilion, Le Bourget, France
Ladies and Gentlemen,
Welcome to this panel discussion on corporate disclosure of climate risks and liabilities.
We have more and more evidence about the risks that climate change poses to our planet. But climate change also threatens the long-term health and stability of financial markets and the global economy. And we don’t know nearly enough to understand and measure these risks.
It is urgent that we improve corporate disclosure on climate change – only then can we ensure that we are making the right investments towards a low-carbon future!
Disclosure is a powerful tool for influencing the behaviour of companies and for protecting investors. A strong disclosure regime can help attract capital and maintain confidence in the capital markets: this is a core message of the OECD/G20 Principles for Corporate Governance, which were endorsed by G20 leaders in Antalya, Turkey, last month.
By contrast, weak disclosure and non-transparent practices can contribute to unethical behaviour and a loss of market integrity at great cost – costs that are shouldered not only by companies and shareholders, but by the entire economy and society.
When it comes to climate change, we need firms and financial institutions to provide more comprehensive and higher quality information. Concretely, this means improved disclosure on their emissions, their exposure to climate risks, and their efforts to manage these risks.
Improved disclosure can tell us, for instance, whether the savings of millions of people are being invested in the transition to a green economy – or whether they are further locking us into the carbon economy we’re so vehemently trying to leave behind.
Improved disclosure can also help investors avoid putting money into unburnable carbon and other stranded assets. Even under the best policy conditions, assets in the energy industry could be stranded to the tune of USD 300 billion over the coming decades if we are to get on track for the 2 degree goal.
It is worrisome how relatively little we know about what companies and investors are doing to measure and manage the risks associated with climate change.
That is not to say that we lack initiatives pushing for more disclosure. Our own investigation, conducted in collaboration with the Climate Disclosure Standards Board, found that 15 of the G20 countries mandate corporate disclosures on climate change by the main emitters of greenhouse gases. And at last count, there were close to 400 different disclosure schemes relating to climate or sustainability! Let me just mention a couple of these:
In some cases, these initiatives are leading to decisive action on the part of investors. For instance, it was recently reported that the world’s largest sovereign wealth fund, Norway’s Government Pension Fund Global, has divested from 114 companies on climate grounds.
But despite these efforts, we still have a long way to go. We still only have a partial view of the risks involved. Current initiatives are fragmented and not yet sufficiently useful to firms and investors. Around half of the top 500 global asset owners have done nothing to protect their investments from climate change, according to a survey by the Asset Owners’ Disclosure Project. Only 7% calculate their portfolio’s emissions, a mere 1.4% have reduced their carbon intensity since 2014, and none have assessed their portfolio-wide exposure to fossil fuel reserves. This is far from where we want to be!
The coverage of disclosure schemes falls short, as does the quality of information. Current disclosure schemes don’t provide investors and other stakeholders with the information they need to fully reflect climate risks in their decisions. Schemes vary considerably in their scope, resulting in assessments that are neither comparable nor comprehensive:
We can do better!
These are also the very issues that are being discussed at the Financial Stability Board, whose Chairman, Mark Carney last week announced the establishment of an industry-led disclosure task force on climate-related financial risks, following a mandate from G20 ministers.
And this is precisely why we are here today to discuss how we can improve current reporting frameworks. Our conversation will centre on two primary questions:
I am honoured to have a tremendous panel of experts here to help chart the way forward: