Mark Carney calls on Michael Bloomberg to chair new global climate risk task force

James Murray
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Chair of the Financial Stability Board accepts recommendations for a new task force to track climate-related risks for financial markets

Mark Carney, chair of the Bank of England and the global Financial Stability Board, will today announce the launch of a new Task Force on Climate-related Financial Disclosures to be chaired by former New York Mayor, Michael Bloomberg.

The task force is to established following a proposal to the G20 that was submitted by the FSB earlier this month, calling for a dedicated body to promote and improve climate-related disclosures from listed companies around the world.

Speaking at the launch of the new body on the sidelines of the Paris Climate Summit, Carney said the task force would "make recommendations for consistent company disclosures that will help financial market participants understand their climate-related risks".

"Access to high quality financial information will allow market participants and policymakers to understand and better manage those risks, which are likely to grow with time," he added.

He also argued Bloomberg's long term commitment to tackling climate change issues as well as his "unparalleled track record of execution in a broad range of fields and his lifelong commitment to open and transparent financial markets" made him the "ideal leader for the Task Force".

The task force is expected to be modelled on the FSB's Enhanced Disclosure Task Force (EDTF), which was set up in 2012 in the wake of the financial crisis and brings together industry experts to make recommendations on how to improve risk disclosures from across the banking sector.

The new task force will initially consist of around 10 members who will report by the end of March next year on the group's scope and goals. It will then be extended to around 30 members who will deliver a series of voluntary recommendations on how to improve climate-related disclosures. It is expected to complete its initial work by the end of next year.

Bloomberg said there was urgent need for reform in the way businesses report on climate related risks.

Growing numbers of firms report on their carbon emissions and the level of climate risk they may face, but the quality and reach of disclosures varies massively by region and industry, leaving many investors frustrated at their inability to assess the climate risks a company may face.

"It's critical that industries and investors understand the risks posed by climate change, but currently there is too little transparency about those risks," said Bloomberg. "When Governor Carney laid out the idea for a Task Force on Climate-related Financial Disclosures, I offered him my full support to help make it a success. While the business and finance communities are already playing a leading role on climate change, through investments in technological innovation and clean energy, this Task Force will accelerate that activity by increasing transparency. And in doing so, it will help make markets more efficient, and economies more stable and resilient."

The launch of the new task force represents another victory for the global campaign to encourage investors to assess the climate risks faced by their portfolios and identify high carbon assets that may become stranded if the world shifts towards a low carbon economy.

Consequently, the announcement was welcomed by a host of figures from across the investment community.

Chris Cheetham, global chief investment officer at HSBC Global Asset Management, described the establishment of the Task Force as "an important step towards creating the transparency and consistent standards needed for investors and pension funds to understand the risks and opportunities within their portfolios as we transition to a low carbon economy".

His comments were echoed by Richard Stathers, head of responsible investment at Schroder Investment Management, who argued there was an urgent need for investors to get a better hold on the climate risks they face.

"Few, if any, corporates have honestly assessed the implication of different climate change scenarios to the economy and their value chain," he said. "Yet the research suggests that unconstrained climate change poses a very real risk to long-term asset value and economic productivity and, as a result, to the ability of pension funds to meet future obligations. The FSBs establishment of the Task Force on Climate-related Financial Disclosures is a very welcome and timely announcement. The outputs of which will not only build on the achievements of other disclosure groups but, more importantly, enable financial markets to better understand how companies are financially exposed, whether positively or negatively, to political efforts to decarbonise the global economy as well as to the physical impacts of climate change already at work."

Alice Garton, company and financial lawyer for ClientEarth, argued it was inevitable capital will start to move away from assets that are exposed to high levels of climate risk, adding that the FSB task force and the growing threat of legal action against companies that do not adequately disclose climate risks would combine to accelerate this trend.

"It's essential that businesses report their climate-risks clearly and consistently," she said. "One of the strongest messages coming out of COP21 is that business as usual is no longer an option. Whether or not we get an international agreement, the INDCs already on the table change the landscape of business and investment decisions dramatically. This increased focus by the FSB, and our own litigation programme designed to create a step-change in climate risk reporting, will drive investors' capital away from businesses who are unable to demonstrate they are adapting to climate change to those that are. Those businesses that fail to adapt to the new normal will find it impossible to survive."

The launch of the task force is another victory for a sustainable investment community that has passed a series of milestones in the past week.

A coalition of institutional investor groups will this afternoon provide an update confirming that more than 400 investors with a collective $ 24tr in assets under management have now signed the Global Investor Statement on Climate Change, while more than 115 investors have pledged to disclose their carbon footprint through the Montréal Pledge and the Portfolio Decarbonisation Coalition has seen 23 investors responsible for $130bn of assets commit to reducing their financed emissions.

Moreover, the global divestment campaign announced earlier this week that more than 500 institutions with assets worth $3.4tr have pledged to ditch carbon intensive assets in some form.

"Investors know they have a unique role in enabling both the pace and scale of investment required to realise Government ambitions around the world to curb runaway climate change," said Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change. "They also know that a global deal will never become easier in the future so they have come to Paris calling in the strongest possible terms for a long term emissions reduction goal to deliver the 2C objective."

This article is part of BusinessGreen's Road to Paris hub, hosted in association with PwC.

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