Companies do not disclose financial risks of climate change

60 percent of the world's largest companies take sustainability issues into account in their annual financial statements, but only one in four also addresses financial risks arising from climate change for their own business (28 percent).

This is the result of the KPMG Survey of Corporate Responsibility Reporting 2017, for which 4.900 corporate reports from the 100 largest companies in 49 countries, as well as the reports of the world's 250 largest companies by revenue ("G250"), were examined.

Only in five of the 49 countries studied do the majority of the largest companies report on financial risks related to climate change: Taiwan (88 percent), France (76 percent), South Africa (61 percent), the United States (53 percent) and Canada (52 percent). In most of these cases, disclosure of climate-related risks is either required by law or at least recommended by the government, stock exchange or financial regulator.

Christian Hell, Senior Manager Sustainability Services at KPMG, says: "The pressure on companies to address sustainability issues is growing. Their number is also increasing worldwide, but there is still a lot of potential here. Although general awareness in Germany is more widespread, especially among the companies with the highest sales, than in international comparison, there is still a lot of catching up to do in this country, particularly with regard to comprehensive and systematic analyses of potential market risk."

He continues: "Financial risks resulting from climate change in particular are addressed comparatively rarely. However, those who do not disclose these risks could lose investors and thus unintentionally increase capital costs and insurance costs."

In particular, companies in the paper and forestry industries (44 percent), the chemical sector (43 percent), mining (40 percent) and the oil and gas industry (39 percent) take climate-related financial risks into account comparatively frequently in their corporate reports. Awareness of financial climate risks is also comparatively high in the automotive industry and among utilities (38 percent each).

There is still a clear need to catch up in the financial services sector, where only a quarter of all companies include financial risks associated with climate change in their reports (24 percent), in trade (23 percent), in transport (20 percent) and in the healthcare sector (14 percent).

At climatetalkslive.org, KPMG, in cooperation with the UN Climate Secretariat, is aggregating tweets about the climate summit in Bonn from November 6 to 20, 2017.

Photo: Pixabay, CC0 Public Domain