Over half of FTSE companies not reporting climate risk to shareholders
26 September 2018
BT, M&S and Unilever lead the way on urgent climate action, but the majority of companies are not doing enough.
Independent research released today examines the environmental reporting of FTSE 100 companies based on public information. The results place BT out in front with M&S and Unilever also in the top three.
However, according to the research carried out by international climate change consultancy EcoAct, despite investor calls for action, 52 per cent of the index are not providing an adequate assessment of climate risk to their business. Over a quarter of companies fail to even acknowledge climate change as a risk in their annual reports.
In the wake of one of the hottest and most fiery summers on record, the research reveals how well the UK’s largest and most influential companies are responding to climate change and wider environmental sustainability issues. In the face of an impending “hothouse” earth, the reasons for businesses to step up climate action are intensifying.
Climate action is increasingly a commercial imperative as shareholders demand companies assess the risks of a hotter world with more extreme weather events. S & P Global last year reported 106 instances of corporate ratings downgrade as a consequence of environmental and climate risk factors. Nearly 400 investors with $32 trillion in assets have now launched the Investor Agenda to highlight climate action and scale up their commitment to action.
Investors are also rapidly divesting from fossil fuels. Those already publicly committed to doing so represent $6.2tn in assets under management. The EcoAct research shows that FTSE companies are also responding to growing pressure to divest, with the number of companies divesting having doubled since last year.
The recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), spear-headed by Bank of England Governor Mark Carney, are already playing an important role in companies’ climate disclosures according to the research. The TCFD focus on financial risk seems to have inspired action in the banking sector, which is now one of the best performing industries for disclosure, following previous years without recognition.
There are other positive findings. More businesses are setting targets and reducing emissions. Last year’s report found just 8 per cent of FTSE 100 companies were committed to reducing their emissions, in line with a science-based target to limit global warming to 2 degrees. This year it is 20 per cent of companies.
75 per cent of companies use renewable energy, with increasing numbers committing to using renewable energy sources for 100 per cent of their energy needs. This reflects the falling cost of renewables as well as other commercial positives such as business reputation. In short, the low carbon economy is now a booming market and a safe investment.
That BT, M&S and Unilever are leading the way may come as no surprise given their well-publicised sustainability drives. BT has been recognised due to ambitious targets across its supply chain as it rapidly approaches its 100 per cent worldwide renewables target.
“We are delighted to be recognised like this by EcoAct. It’s been a very exciting year for us, setting our 1.5 degree Celsius science-based target and continuing to collaborate with our suppliers on environmental sustainability. We hope that by leading by example we can inspire others to take action,” said Gabrielle Ginér, Head of Environmental Sustainability at BT.
“It is within our hands to catalyse carbon reduction throughout all sectors of the economy. Last year, BT’s products helped our customers cut their carbon emissions by 11.3 million tonnes, for example through video conferencing and vehicle telematics.”
Despite the strength in leadership, the FTSE lags behind other international indices on some sustainability performance indicators such as climate risk, scenario analysis and risk mitigation.
Mark Chadwick, CEO of EcoAct, said: ‘We are at a pivotal moment in time with increasing scientific warnings of catastrophic climate change, international political flux, and crunch time on the Paris Agreement. As challenging as this may be, we need to learn from the businesses leading on climate who are stepping up to ensure the resilience of business and the wider the economy.’
To access the full findings from the FTSE 100 and across other international indices (the Dow Jones, CAC 40 and IBEX 35) access the report here.