Climate Accounting Analyses

In Sept 2020 investor groups including the PRI called upon companies to reflect climate-related risks in financial reporting. Between March and May 2021, the PRI commissioned a series of climate accounting analyses for 52 Climate Action 100+ focus companies coordinated by PRI and AIGCC. These analyses, available to download below, aim to raise awareness and inform investor engagement about the extent to which companies’ audited financial statements and audit reports are currently integrating climate change. They will also support the development of a new indicator to be included in the next iteration of Climate Action 100+ Net Zero Benchmark that will assess a company’s climate accounting practices and audit process.

Despite significant financial risks faced from the climate crisis, and net-zero pledges made by many we found little evidence that companies or their auditors considered climate-related matters in the 2020 financial statements.

These analyses are also part of a broader project conducted in a collaboration between the PRI, the Carbon Tracker Initiative and a team of independent experts comprising the Climate Accounting Project. The result is the report ‘Flying blind: The glaring absence of climate risks in financial reporting’, which summarises the review of 107 global companies in carbon-intensive sectors (including the 52 below). It examines whether firms (and their auditors) considered material climate-related risks in financial reporting, as well as whether investor concerns about Paris-alignment of assumptions and estimates have been addressed.

The individual assessments for each of the 52 companies below were prepared by the Climate Accounting Project and assess companies against three basic criteria:

Do the audited financial statements reflect climate change issues, and are they consistent with the narrative reporting in relation to climate change?
Are the climate-relevant assumptions disclosed, and if so, are they consistent with the goals of the Paris Agreement?
Does the work of the auditor appear to have incorporated climate change issues? In particular, has the auditor considered the consistency of the audited financial statements with the narrative reporting with respect to climate change, and is there a key (or critical) audit matter relating to climate change?

For more information on this work, please refer to theses summary slides and to the report prepared by the Carbon Tracker Initiative. For any further questions, please contact Livia Rossi: [email protected]

_{PRI is coordinating with Ceres, IIGCC and Carbon Tracker who are providing analysis on separate CA100+ focus companies. These efforts will be merged into a summary report including results of both sets of work and into a new indicator of the CA100+ Net Zero Company Benchmark.}