#𝗘𝗦𝗚𝗶𝗻𝗧𝗵𝗿𝗲𝗲: With proxy season heating up and data showing that we experienced the warmest April ever recorded, marking the 11th consecutive month of record-breaking global temperatures (according to NOAA), companies are increasingly recognizing that risks and opportunities related to climate change are creating measurable financial impact. And most are likely to continue to experience the effects of physical and transitional climate risks. But within these risks, lie opportunities. A recent article by Anthropocene Magazine found, “climate risks—and a company’s response to them—shape market value” and “the market rewards companies that take a proactive approach to addressing climate risks.” The research suggests that companies that don’t prioritize and act on climate risks are increasingly likely to lose market value, “companies facing high transition risks tend to be valued less by investors,” as investors are placing a premium on companies that are proactively responding to climate risks.
This theme continues to support the movement towards greater transparency and disclosure as a critical tool to drive a deeper understanding of climate risk, provide insight into strategic actions, and instill accountability. Building on this, a recent survey by the CAQ of 100 institutional investors (https://lnkd.in/dHYg5mZJ) looked to understand the role of, and confidence in, climate-related disclosures when it comes to investment decision-making.
A few key findings:
𝟭. Nearly all investors (94%) want public companies to have climate-related disclosures audited and assured by a third party.
𝟮. Almost all investors (91%) would be confident in climate-related disclosures if companies were assured by public audit firms with environmental experts.
𝟯. Key characteristics of public company audit firms engendering confidence in assurance of climate related disclosure include: extensive experience in gaining understanding of business processes and assessing and responding to risk, routinely integrating subject matter experts, and requirements to maintain system of quality control.
The time to act is now to accelerate assurance ready climate disclosure, to not only prepare for evolving regulatory requirements, but to strengthen trust and confidence among investors and other stakeholders.
#deloitteesgnow
References:
NOAA Article: April 2024 was Earth’s warmest on record | National Oceanic and Atmospheric Administration (noaa.gov)
Anthropocene Article: Companies that ignore climate change risks lose market value (anthropocenemagazine.org)