BHP BHP Group Limited

By Sarah Kent 

LONDON -- A panel of large financial institutions and companies has launched a set of voluntary guidelines for more disclosure about the impact of climate change, demonstrating rising concern about potential investment risks posed by global warming.

The task force commissioned by a group of global regulators known as the Financial Stability Board and led by former New York City Mayor Michael Bloomberg said companies should disclose in financial filings how they are planning for risks and opportunities related to climate change. It also called for companies to develop specific metrics and targets that could be used to measure performance.

Climate-change risks have become an increasingly mainstream concern for financial institutions and big companies, which see both a real menace from global warming and a regulatory threat from governments seeking to lessen its impact. The task force included executives from J.P. Morgan Chase & Co., mining giant BHP Billiton Ltd., and other large companies.

The recommendations have support from over 100 firms with market capitalizations totaling more than GBP3.3 trillion and financial firms responsible for more than $24 trillion worth of assets, the task force said. The report will be presented to the G-20 in July.

The recommendations' "widespread adoption will ensure that the effects of climate change become routinely considered in business and investment decisions," said Mark Carney, the Bank of England governor and chairman of the Financial Stability Board.

Not everyone has welcomed the panel's work. A recent report by IHS Markit funded by oil companies including BP PLC, Chevron Corp. and Total SA warned that recommendations contained in an earlier draft of the task force's report "could obscure material information and create a false sense of certainty around the financial implications of climate-related risks."

The task force's report, which took over a year to compile, extends its recommendations for more disclosure to all public companies. But the panel singled out the energy industry as one of four sectors most at risk from climate change that should consider providing more information to investors.

Last month, Exxon Mobil Corp. faced a revolt when 62% of its investors voted in favor of a resolution calling for more information about how climate change and regulations could affect it, despite management objections. Exxon declined to comment. Chief Executive Darren Woods previously said the company would "step back and reflect" on how it could better express its position.

Faced with a similar vote, Chevron published a report on its approach to managing climate risks in March. The company said it uses a similar framework to the one recommended by Mr. Bloomberg's task force.

"We believe Chevron's risk management and planning processes are effectively managing the current risk exposure to the Company," a spokeswoman said. "The current risk from climate change regulation, even in a restricted greenhouse gas scenario, is minimal and manageable over time."

A major criticism from investors is that many big operators are making claims similar to Chevron's: that their assets and strategic capabilities will allow them to win out in even the most severe of climate-change scenarios. The fact that most say they will be among the last oil-and-gas companies standing has prompted calls for greater transparency and more standardized reporting.

In Europe, some big oil companies have embraced demands for more climate disclosure. Royal Dutch Shell PLC and BP PLC both endorsed proposals asking for more disclosure on climate change risk in 2015.

Shell welcomed the task force's report but warned that detailed disclosure of forward-looking and potentially commercially sensitive information within official financial filings could be difficult.

"Companies should be clear about how they plan to be resilient in the face of climate change and energy transition," said Shell Chief Ben van Beurden.

In the U.S., shareholder support for more disclosure from oil-and-gas companies revealed in recent weeks is largely nonbinding.

The calls for more disclosure and transparency come even as the Trump administration says it is pulling the U.S. from the Paris climate accord, citing the need to boost the nation's industry and independence.

"This was done by industry for industry, and there are compelling reasons for companies to begin this journey," said Mary Schapiro, a former Securities and Exchange Commissioner chairman who is advising Mr. Bloomberg. "In the U.S. I have no expectation that there will be a regulatory framework around these recommendations."

The pressure from some regulators has begun to mount. The Bank of England said earlier this month that it will probe the U.K. banking sector's exposure to climate change. Others, including Dutch, Swedish and German authorities have also been examining the financial risks presented by the environment.

--Bradley Olson in Houston contributed to this article.

Write to Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

June 29, 2017 02:14 ET (06:14 GMT)

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