More than 70% of 100-plus of the world’s most carbon-intensive firms failed to fully disclose climate risk in last year’s financial statements, according to new research by thinktank Carbon Tracker and the Climate Accounting Project.
Following a study of 107 companies, which included the majority of 94 firms listed by investors as having significant carbon footprints through Climate Action 100+, Carbon Tracker says the “glaring absence” of disclosures was signed off by 80% of auditors without assessment of climate risk.
The study focuses on some of the world’s largest carbon emitters, including Chevron, Exxon Mobil and Air France-KLM.
It found that European companies, which accounted for 41% of firms in the study, “led” climate disclosure transparency. US firms, which accounted for 39% of the study, along with firms in Asia and emerging markets, are “lagging behind”, Carbon Tracker adds.
Barbara Davidson, senior analyst at Carbon Tracker, commented: “Based on the significant exposure these companies have to transition risk, and with many announcing emissions targets, we expected substantially more consideration of climate matters in the financials than we found.
“Without this information there is little way of knowing the extent of capital at risk,” Ms Davidson added.
Not one of the companies in the study demonstrated good practice in the areas of climate matters analysed, and none incorporated Paris Agreement-aligned assumptions to keep global warming to no more than 1.5°C and achieve net-zero emissions by 2050, Carbon Tracker notes.
It adds that energy companies provided most evidence of transparency on climate issues within their financial statements.
Carbon Tracker says its findings go against pressure from investors as well as global accounting and auditing standard-setting guidelines to disclose climate risks, and in particular how that impacts financial risk.
Rob Schuwerk, executive director at Carbon Tracker North America, said: “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, much less an understanding of how management and auditors believed those assumptions to be reasonable.”
Carbon Tracker says companies should disclose climate-related, forward-looking assumptions and estimates, while auditors should ensure financial statements are consistent with other company disclosures about climate issues. It also calls for regulators to identify inconsistencies and audit failures as part of their supervisory reviews.