An influential group of investors is for the first time demanding that all UK-listed companies disclose how the climate emergency will impact their business.
The Investment Association, which represents 250 members with £7.7tn under management, has set a three-year deadline for companies to explain in their annual reports how they plan to measure and manage the threat of global heating.
It comes amid fears that shareholder investments could end up being worthless if companies fail to adapt their business models appropriately.
Andrew Ninian, the IA’s director of stewardship and corporate governance, said: “With one-third of the FTSE owned by IA members, our industry is looking to the UK’s largest listed companies to demonstrate that climate change is being taken seriously in boardrooms.
“Climate change could result in a significant loss of value in companies if risks are not effectively measured and managed, ultimately hitting savers’ pockets. Companies need to be looking at the impact of climate change on their business, products and strategy and set out to investors how they are responding to these risks.”
The IA is instructing all listed companies in the UK to comply with standards set by the Task Force on Climate-related Financial Disclosures (TCFD), which outlines how companies should calculate and disclose their exposure to climate risk to investors, by 2022.
“This will see companies reporting on climate-related risks in a consistent, clear and comparable manner, enabling investment managers to make better-informed investment decisions,” the IA said.
It came after the group discovered that only 30 companies on the FTSE 100 had implemented the TCFD recommendations, though the quality of those disclosures varied. A further 53 mentioned some type of climate-related risks, but fell short of those standards.
The group expects companies to consider different scenarios, reflecting how incremental degrees of global heating and government policies may affect their income and supply chains.
The IA said it would also continue to press companies on other major governance issues over the upcoming AGM season, focusing on gender and ethnic diversity, executive pay, including pensions, and the quality of audit.
