For companies, the annual accounts are the opportunity to demonstrate to their shareholders and the public opinion their commitment in the fight against climate change. A whole declaration of intent that is not usually reflected later in the financial statements, as revealed in a study prepared by the Carbon Tracker Initiative and the Climate Accounting Project . More than 70% of the 107 companies analyzed – including Repsol, Exxon Mobil, BMW or Air France – did not include in their annual accounts information indicating that critical risks related to climate were taken into account when preparing the statements. 2020 financials . Those that claimed that they had been taken into account did not detail what assumptions had been used.
The 80% of the auditors failed to take into consideration the climate issue to the audit these companies, 94 of which are part of the Climate Action (CA) 100+ [1] group, considered crucial for the energy transition by investors.
A lack of transparency that directly affects investors , who have no way of knowing the extent of capital at risk, or whether funds are being allocated to unsustainable businesses, says Barbara Davidson, lead author of the report.
Also noteworthy is the lack of consistency in the reports of three-quarters of these companies and the fact that none incorporated the assumptions aligned with Paris into their financial statements , not even through sensitivity analysis, which allows us to see the effect of a change in the value of a variable in the final result in a financial analysis.
ESG to improve valuation
Companies’ reluctance to incorporate the climate issue into their practices and finances could be costing them very much.
Good ESG practices can raise the valuation of companies by at least 50%, according to FTI Consulting
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Good ESG practices can raise the valuation of companies by at least 50%, according to FTI Consulting
According to the study The Mainstream of Investing in the Decisive Decade for Climate prepared by FTI Consulting, integrating measures based on ESG criteria (environmental, social and good governance, for its acronym in English) could bring companies an increase in their valuation of the 50% or higher .
Following the response of the institutional investors surveyed, the consulting firm deduces that companies will bet on going beyond simple regulatory compliance to attract new investors by showing leadership through innovation. In addition, the correct incorporation of the ESG criteria will bring with it new talent.
Misaligned with Paris goals
However, for now, there is a long way to go in the degree of concern about the climate crisis and the incorporation of ESG criteria in each of the backbone areas of the companies.
Recently, a study prepared by the InfluenceMap think tank revealed that many funds supposedly aligned with the objectives of the Paris Agreement possess high-pollutant assets , among which are oil companies, something incompatible with limiting global warming to a level well below 2ºC .
It also highlighted that 71% of almost 600 other large funds governed by ESG criteria are not well aligned with the Paris Agreement .
