A group of investors has written to a financial regulator to highlight their expectation that fossil fuel companies use a new reporting requirement to communicate climate change risk to their business.
ClientEarth worked with Sarasin & Partners to write the letter to the Financial Reporting Council (FRC) on behalf of the investor coalition.
A viability statement – setting out the directors’ views on the long term prospects of the company – has been introduced in The UK Corporate Governance Code to ensure boards of directors consider and articulate long term risks.
The letter sets out the long term investors’ expectation that carbon intensive companies should use the new requirement to provide a viability statement in order to address climate-related risks.
ClientEarth Company and Financial lawyer Dave Cooke said: “This letter shows that investors that think long-term want fossil fuel dependent companies to address climate-related risks. The viability statement is an excellent new requirement which should provide investors with the reassurance they need that the directors of a company are addressing long term risks.
“Viability statements need to be aligned with a company’s investment and planning period, so for oil, gas and coal companies this can mean the next 10 to 20 years. It’s inconceivable that climate change would not feature in the risks to their businesses over this period.”
After Paris, we are now on a transition towards a low carbon economy. By sending the letter to the FRC, the investor coalition is signalling its belief that carbon intensive companies must report climate risk to investors to satisfy this reporting requirement.
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