The Financial Sector Is Failing to Estimate Climate Risk, Say Two Groups in the UK - Inside Climate News
Excerpt from this story from Inside Climate News:
The financial sector is failing to grasp the risks of climate change to their customers and to the global economy, which has undercut the urgency to take action to reduce those risks by cutting emissions.
This is according to the Institute and Faculty of Actuaries in the United Kingdom, which issued a report this month, “The Emperor’s New Climate Scenarios.” The authors argue that many financial institutions, including pension funds, are relying on economic models that underestimate the cost of climate change.
Also this month, the environmental nonprofit ClientEarth said the world’s six largest accounting firms are failing to deliver on commitments to improve how they address climate change in financial reporting.
The actions from the actuaries and ClientEarth are part of a growing push from advocacy groups and regulatory agencies to increase disclosure of climate risks and improve the quality of forecasting of potential damages.
The underlying idea is that corporations and pension funds are not adequately accounting for how climate change may harm their performance, which means customers and shareholders don’t know how much they are at risk, including the risk that their retirement funds could lose substantial value.
ClientEarth has been engaging with accounting firms for years to improve the ways that the companies calculate and report the climate risk of their clients. The nonprofit sent a letter in May that goes into detail about the concerns. This week, ClientEarth expressed disappointment that the firms do not seem to be serious about taking action.
“Investors are repeatedly demanding better reporting,” Robert Clarke, a lawyer at ClientEarth’s London office, said in a statement. “Standard setters have already said this is required under existing rules. It’s time the auditors step up and drive the necessary change.”