Asset owners and money managers have important roles to play in encouraging the companies in their portfolios to improve climate-related financial disclosures, said the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures.
The task force published its recommendations on the disclosure of climate-related information in mainstream financial filings Wednesday, and launched a comment period to run until Feb. 12.
“Large asset owners and asset managers sit at the top of the investment chain and, therefore, have an important role to play in influencing the organizations in which they invest to provide better climate-related financial disclosures,” the paper said. In addition, money managers and asset owners should implement the task force’s recommendations, which focus on four themes: corporate governance, strategy, risk management, and metrics and targets.
Climate-related financial information should also be provided by the companies to money management clients and asset owners’ beneficiaries “so that they may better understand the performance of their assets, consider the risks of their investments, and make more informed investment choices,” the paper added.
The paper and its recommendations were welcomed by the Principles for Responsible Investment. “The report’s recommendations, if adopted by companies, will enable investors, insurers, banks and policymakers to better assess risk and opportunity in order to manage an orderly transition to a low-carbon economy,” said Martin Skancke, chairman of the PRI, in its response to the paper. “This approach will assist investors by minimizing the disruptions that could occur from an unmanaged transition.”
The task force also recommends that asset owners and money managers commit to report their own climate policies.
The FSB asked the task force to develop a set of voluntary and consistent disclosure recommendations for use by companies when providing information to investors, lenders and insurance underwriters about the financial risks they face from climate change. The task force chairman is Michael R. Bloomberg.
“What gets measured better gets managed better,” Mr. Bloomberg said in the paper. “Widespread adoption of the recommendations will help ensure that climate-related financial issues are routinely considered in business and investment decisions, and encourage an effective dialogue between companies and banks, insurers and investors. That will lead to smarter, more efficient allocation of capital, and speed the transition to a low-carbon economy.”
The FSB wants comments from public companies, investors, financial institutions and other stakeholders. The final recommendations will be presented to Group of 20 leaders in advance of a meeting in Hamburg in July.
The paper is available on PricewaterhouseCoopers’ website. PwC is administering the response website for the paper.