The governor of the Bank of England Mark Carney has warned major corporates that disclosing their exposure to climate change is “essential” to the emergence of a market-based solution.
His warnings come just as the Task Force on Climate-related Financial Disclosure has published the results of its year-long work on the subject; a consultation recommending how the disclosures could work.
Writing in today’s Guardian, Carney and Bloomberg chief executive Michael Bloomberg, both members of the Financial Stability Board established during last year’s historic COP21 summit in Paris, have said that businesses across the world must come clean about the material risks posed to their operations by climate change.
They have warned that investors do not currently have the right information needed to respond to risks posed to businesses by climate change, and that this must change if the financial markets are to be capable of allocating capital to manage these risks.
“We believe that financial disclosure is essential to a market-based solution to climate change. A properly functioning market will price in the risks associated with climate change and reward firms that mitigate them. As its impact becomes more commonplace and public policy responses more active, climate change has become a material risk that isn’t properly disclosed,” the two wrote.
The Financial Stability Board was created to draw up a model financial disclosure that businesses across the world could replicate to increase transparency over their climate risk. The task force counts investors, financiers, insurance underwriters and private sector representatives among its members, which have consulted over the past year.
A series of recommendations have now been made public, and welcomed by Carney.
“The disclosure recommendations will give financial markets the information they need to manage risks, and seize opportunities, stemming from climate change. As a private sector solution to a market issue, the Task Force has focused on the practical, material disclosures investors want and which all capital-raising companies can compile.”
A consultation has since been launched on the task force’s proposals, which will run for 60 days until 12 February. Publicly-listed companies, investors, financial institutions and other stakeholders are encouraged to respond.
The next step for the recommendations is for a final draft to be produced and presented to G20 leaders ahead of the next G20 summit, which takes place in Hamburg next July.