Coal, oil and gas companies almost universally recognise the risks climate change poses to their businesses, yet just 7% are integrating these threats into their spending choices.
That’s the latest warning of UK think-tank the Carbon Tracker Initiative, as new analysis -– in partnership with CDP and Ceres – shows that many companies are simply paying “lip service” to climate risk.
The research examined the answers of 81 coal, oil and gas companies who took part in a survey by CDP – including some of the world’s largest fossil fuels companies such as BP, Statoil, ExxonMobil, Chevron, BHP Billton and Rio Tinto.
Of the companies asked, 86% said they consider climate change a physical risk for their business, while 99% thought climate-related regulation, including carbon taxes or cap and trade schemes, to be risk to their operations.
Yet just 7% of companies provide evidence that they were adequately integrating this risk into their spending assessments – showing these companies are “failing to connect the dots”.
Last week, Bank of England governor Mark Carney became the latest figure to warn that companies risk being left with a product they can not sell as the world takes action to tackle climate change.
He warned a World Bank seminar “the vast majority of reserves are unburnable”.
It is widely accepted that to keep global warming below 2°C, the vast majority of fossil fuels will have to be left in the ground.
Mark Campanale, Founder and Executive Director of the Carbon Tracker Initiative warned companies must do more to disclose the threat this places on their businesses.
With the IEA forecasting that $23 trillion will be invested in expanding the fossil fuel sector up to 2035, putting this amount of capital at risk doesn’t leave much room for complacency in how climate risks are disclosed.
Four out of five of the companies show no evidence of analysing how different temperature increases could impact their business, while around 10% of the oil and gas companies, and just one coal company, stress-test projects against the internationally agreed goal of limiting warming to 2°C.
Just two of the 32 coal companies who responded to the report survey accept this limit agreed on by governments.
And while 25 companies “acknowledge climate change”, only five of these went on to “acknowledge that climate change requires emissions reductions”.
With the survey sample representing the “best in class” sample – the 24% of fossil fuels companies that received and responded to CDPs 2014 climate change questionnaire – these figures are particularly worrying.
The failure of these companies to disclose how they plan to deal with the transition to a low carbon economy or international climate legislation may affect their business model should sound a warning bell to investors, warn the researchers.
Mindy Lubber, president of the sustainable advocacy group Ceres said:
The report highlights the vast gulf between what investors are looking for and what energy companies are not providing in regards to financial risks from high carbon, high cost fossil fuels projects. Investors should step up their calls to companies to better explain these huge expenditures.
Carbon Tracker Initiative is calling on financial regulators and standard setting bodies to increase their scrutiny of fossil fuel companies and ensure they build “climate literate” capital markets.