Investor views are being sought on how companies can better report on their exposure to ‘carbon asset stranding risks’. The Climate Disclosure Standards Board (CDSB), a consortium of business and sustainability NGOs with links to the CDP, is inviting comments on the matter as part of a forthcoming revision of its climate reporting framework, which was introduced in 2010 to help companies prepare and present environmental information in mainstream reports for the benefit of investors.
A discussion paper issued by the board argues that despite some use of the framework, consideration of the risks posed by carbon assets that could become stranded in the future is ‘almost invisible’ in most corporate reports. It therefore proposes amendments to existing legislation around the world as well as new requirements to reporting laws, standards and practices that it believes will encourage companies to report on such matters ‘in a way that is useful for investors’. The board says companies need to improve their disclosure and performance on carbon asset stranding risks as there are ‘clear signals’ that investors are starting to divest from companies that do not do so. It adds that ‘preserving the status quo whereby fossil fuel energy resources are sought, invested in, valued and listed on stock exchanges threatens not just environmental, but financial disaster’.
CDSB executive director Lois Guthrie said that despite some progress made under the framework, a voluntary approach had clearly not been effective – and it is now time for reporting standards ‘to be updated to require disclosures relating to the potential risks from carbon assets becoming stranded’. The CDSB’s discussion paper was published online on 29 April and comments can be made until 28 May. No timetable has yet been announced for the revision process connected to the CDSB’s climate reporting framework.
In September the Principles for Responsible Investment (PRI) will be running the annual ‘PRI in Person’ conference in Montréal, Canada. As part of the conference a session will tackle the issue of stranded assets and provide insights on the strategies investors are using to mitigate risk. To find out more about PRI in Person, including the session How do responsible investors view energy? click here.