ESG Round-up: Study finds just two FTSE100 firms have climate flagged as risk in audit reports

An academic study has shown that just two FTSE100 audit reports identified climate change as a significant risk. Research from professors at Sheffield University and the University of London concluded that 61 companies’ audits considered climate to be within scope, but climate was only namechecked in the audit opinion of 36. In 34 of those, which included audit reports for Shell and BP, “the auditors suggested that climate change raised no issue of concern”, said the authors. Meggitt, which makes components for the defence, transportation and energy sectors, and house-building company Persimmon, were the only companies whose audit opinions noted climate-related issues as significant.

The Investor Agenda has updated its guidance on Investor Climate Action Plans (ICAPs). The initiative, which is backed by groups including the Principles for Responsible Investment, Ceres and the Institutional Investor Group on Climate Change, has fleshed out its expectations on different asset classes, sectors and methodologies, and added information on where to find resources on biodiversity, climate adaptation and resilience.

Investors should support the concept of ‘decent work’ by advocating for workers’ views, the living wage, access to benefits and protections and equal treatment, according to a paper from the Principles for Responsible Investment. The document identifies the climate transition, demographic changes and advances in technology as the three key shifts that will impact working conditions in the future.

The Bank of England has warned that banks and insurers that aren’t managing their climate risks adequately could face higher capital requirements and up to 15 percent lower annual profits. In a speech last week, the central bank’s deputy governor, Sam Woods, said that climate change is set to impact profitability in the two sectors, particularly if risks are not taken seriously. “While they vary across firms and scenarios, overall loss rates are equivalent to an average drag on annual profits of around 10-15 percent,” he said, referring to recent climate stress tests that assessed how institutions would cope with climate shocks and the transition to net-zero by 2050.

Brazil’s ‘investors for climate’ group has backed the publication of a guide on climate stewardship in the country. The document, which seeks to help asset owners and managers in Brazil fulfill their fiduciary duties and manage climate risks and opportunities, has now been translated into English.