Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, August 13, 2009

More to do on disclosure of climate change policies by companies.

Yet more pressure on investors to persuade companies to toe the line, this time on climate change disclosures. Inevitably, the burden of communication will fall on those responsible for investor communication.

Eiris, the provider of research into the social, environmental and ethical performance of companies, has just updated its 2008 work critiquing the identification, mitigation and communication of climate change impacts. It concludes that while corporate commitment to mitigation has improved, unmitigated and undisclosed risk is still unacceptably high.

First the good news: The report found that of the 300 companies analysed, over half have short-term targets on climate change, and 91% of high impact companies disclose absolute CO2 or greenhouse gas emissions data. High impact sectors are defined by the report as chemicals, construction, electricity, food, industrial metals, mining, and oil and gas.

However, for indicators such as governance, strategy, disclosure, and performance, the report found that over a third of the 300 companies analysed continue to carry unmitigated climate-related risks. To be sure, short-term emissions reduction targets are there, but looking further out it is harder for companies to adopt long-term strategies – and communicate them, possibly because governments have yet to adopt regulations for emissions reductions.

And it places the burden – again – on the shoulders of investors. The report suggests "Investors must understand the impact these issues will have on their portfolios and integrate climate change into their engagement strategies or when exercising voting rights. The more companies are doing, the less risk investors are incurring. We suspect that investor activism has had an impact on companies addressing more of risk."

And board remuneration should be linked to success. According to the report, “only about 20% of companies incentivise management attention to climate risks, so activist investors should engage with companies to ensure that management structures do so”.

With pressure on investors from reports like this, and from the upcoming Copenhagen climate change meeting, IR professionals may want to be ready with the answers.


Post a Comment

<< Home