Concerns are growing that assets are being mispriced because full extent of climate risk is not being factored in
• Recommends climate risk disclosure in financial reports
• Regime would be voluntary, some push for mandatory
• Disclosure could help make markets more efficient
By Nina Chestney
LONDON, Dec 14 (Reuters) - A global task force set up to try to prevent market shocks from the warming of the planet will ask companies to disclose how they manage risks to their business from climate change and greenhouse gas emission cuts.
Although the measures recommended by the Task Force on Climate-Related Financial Disclosures (TCFD) are voluntary, some of its members argue they should become mandatory.
"Only then will climate risk become integral to corporate governance and how we all do business," Mark Wilson, chief executive of insurance firm Aviva Plc, said in a statement.
The TCFD was called for by the Group of 20 leading economies and set up by the G20's Financial Stability Board (FSB).
It recommended on Wednesday that listed companies disclose how they identify, assess and manage climate risks and opportunities and how risks in the short-, medium- and long- term impact their business, strategy and financial planning.
They should also describe the potential impact of limiting global temperature rise to 2 degrees Celsius on their business, and how greenhouse gas emission cuts will impact their bottom line, it said.
"It remains the case that only one third of the top 1,000 U.S. companies produce broadly comparable information on the climate risks they face," Bank of England Governor Mark Carney, who chairs the FSB, said at the launch of the report.
"With the right information, you can have optimists and pessimists (on climate change) ... back decisions with capital. This is about giving people the right information," he added.
Energy, transportation, materials and buildings, agriculture, forest and food products, banks, insurance companies, asset owners and asset managers are probably the sectors most exposed to climate-related financial impacts, the report said.
Energy companies in particular should consider disclosing whether and how performance metrics for their boards and management, including remuneration policies, take climate risks and opportunities into account, it said.
Concerns among the financial community are growing that assets are being mispriced because the full extent of climate risk is not being factored in, threatening market stability.
According to Barclays, the fossil fuel industry could lose $34 trillion in revenues by 2040 as a global deal to limit temperature rise to well below 2 degrees Celsius reduces demand for oil, coal and gas, turning reserves into stranded assets.
There are also calls for increased company transparency.
U.S. oil company Exxon Mobil Corp. is currently being investigated in the United States on whether it misled investors and the public about climate risks.
Exxon said in September it was confident its financial reporting meets all legal and accounting requirements.
The TCFD has 32 members from large banks, insurance companies, asset management companies, pension funds, credit rating agencies and accounting and consulting firms.
A 60-day public consultation will run until Feb. 12, 2017 to get feedback on the recommendations. (www.fsb-tcfd.org/)
(Editing by Alexander Smith/Jeremy Gaunt)
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