Bank of England governor Mark Carney has released his “by the market for the market” recommendations on climate disclosure, although questions remain whether US president Donald Trump will join other G20 leaders in endorsing the report.
The final report from the Task Force on Climate-related Financial Disclosures has already received support from financial institutions representing $25trn in assests, as well as companies with a total market cap totalling $3.5trn.
It focuses on governance, strategy, risk management, and metrics and targets and would require companies most impacted by the transition to a low-carbon economy to include climate risk disclosures in their financial reporting.
However, questions remain whether Trump, who has announced the US will withdraw from the Paris Agreement, will support the recommendations when they are presented to G20 leaders in Hamburg next month.
Axa Investment Managers global head of responsible investment Matt Christensen says the final recommendations have already been “watered down” due to US political headwinds.
“We would like to see the G20 endorse these recommendations and if this is not possible then we would urge the G19 to have the courage to do so. This would send a message to the US that, once again, they stand apart.”
Instead, Europe will continue to lead the way on ESG, Christensen expects.
Speaking in his role as chair of the Financial Stability Board, which established the task force, Carney said the the report was developed “by the market for the market”.
Signatories within the asset management industry include Aviva Investors, Jupiter Fund Management, LGIM and Schroders, alongside insurers, ratings agencies, the London Stock Exchange and major banks, like Citigroup and UBS.
“Widespread adoption will provide investors, banks and insurers with that information, helping minimise the risk that market adjustments to climate change will be incomplete, late and potentially destabilising,” Carney says.
A report released by London School of Economic researchers last month argues the central bank’s own corporate bond buying programme could undermine the report’s recommendations.
The BofE’s £10bn programme has 49.2 per cent allocated to utilities and manufacturing, which are responsible for 52 per cent of UK emissions while accounting for 11.8 per cent of gross value added.