Over 70% of some of world’s biggest corporate emitters failed to disclose the effects of climate risk in 2020 financial statements. 80% of their auditors showed no evidence of assessing climate risk when reporting

LONDON/NEW YORK, SEPTEMBER 16 – More than 70% of listed companies that represent some of the world’s largest carbon-polluters, including household names like Chevron, Exxon Mobil, BMW, and Air France-KLM, alongside most of their external auditors, are not fully accounting for climate-related risks in financial statements. This is despite significant financial risks faced from the climate crisis and net-zero pledges made by many.

These are the key findings of Flying Blind: The glaring absence of climate risk in financial reporting, issued today by Carbon Tracker, based on a study coordinated with the Climate Accounting Project (CAP).

Barbara Davidson, senior analyst at Carbon Tracker and lead author of the report, said: “Based on the significant exposure these companies have to transition risk, and with many announcing emissions targets, we expected substantially more consideration of climate matters in the financials than we found.  Without this information there is little way of knowing the extent of capital at risk, or if funds are being allocated to unsustainable businesses, which further reduces our chances to decarbonise in the short time remaining to achieve Paris goals.”

For the study, the teams reviewed the 2020 filings and other relevant reports of 107 companies, including 94 that are part of the Climate Action (CA)100+[1]  focus companies.  These are companies which investors identified as having significant carbon footprints and/or as crucial to the energy transition.

The study covered a range of sectors: 33% Oil and Gas, 17% Transportation, 13% Utilities, 7% Cement, 7% Consumer Goods and Services, and 23% Other industrials (including mining, chemicals and steel).  The report found that over 70% of the companies reviewed did not provide evidence that they had considered climate in their 2020 financial statements, or any indication as to why such matters might not be significant to their businesses.

Surprisingly, 80% of the auditors did not appear to assess the effects of climate risks when auditing these companies.

In 2019 and 2020 global accounting[2] and auditing standard-setters clarified that material climate-related risks should not be ignored in accounts or in audits.  Furthermore, a significant coalition of investors requested that companies and their auditors consider material climate risks in forthcoming financial statements.  This includes an Open Letter signed by investor organisations[3] including the Principles for Responsible Investment (PRI), among others, an investor letter authored by Sarasin & Partners LLP and signed by members of the Institutional Investors Group on Climate Change (IIGCC)[4], and a report by Ceres[5].

Many financial statement amounts can include assumptions and estimates about the future. For example, impairment testing of long-lived assets looks at future cash flows to support recovery of asset values. These cash flows could be adversely impacted by the energy transition due to declining demand for products or commodity prices, among others.  However, few companies disclosed these inputs, leaving no way to know if climate had been considered.  This is distinctly separate from information that is outside of the financial statements, such as sustainability disclosures.

Another concern raised by the report is the lack of consistency across company reporting. 72% of companies showed no evidence of follow through from other discussions of climate risks or emissions targets to their treatment in the financial statements, or explained any differences.  Despite this, 63% of the auditor consistency checks did not identify these inconsistencies.

Importantly, none of the companies incorporated Paris-aligned assumptions into their financial statements, even via sensitivity analyses.  This had also been requested by the significant coalition of investors in order to achieve no more than 1.5 degrees warming and net-zero emissions by 2050.

Rob Schuwerk, executive director, Carbon Tracker North America and co-author of the report, said:  “It is disappointing to see companies acknowledge that the energy transition is likely to adversely impact their results, to have their auditors identify forward-looking assumptions as critical audit matters subject to significant uncertainties, and yet see little to no disclosure about the assumptions underpinning the accounts, much less an understanding of how management and auditors believed those assumptions to be reasonable.”

To address problems highlighted in the report, researchers recommend the following changes:

  • Companies disclose climate-related forward-looking estimates and assumptions, such as remaining useful lives and projected carbon or commodity prices, to show how they are taking climate-related risks (and their own climate targets) into account. This also gives investors a starting point for their analyses.
  • Auditors ensure that the financial statements are consistent with other company disclosures about climate-related matters, that climate-impacted assumptions and estimates are adequately scrutinized in the audits and transparently disclosed in company reports, and that investor demands for downside sensitivities are satisfied.
  • Regulators should, as part of their supervisory/enforcement reviews, identify inconsistencies and audit failures, and ensure that they are addressed.
  • Investors should engage with companies on these issues and consider them in voting and investment decisions.

Of the 107 companies, 41% are in the UK/Europe, 37% in the US/Canada, 14% in Asia, and 8% in Emerging Markets, ex-Asia. Companies in UK/Europe led in the transparency of consideration of climate in the financial statements, with US, Asia, and Emerging Markets ex-Asia companies lagging behind.

Compared to other sectors profiled, energy companies provided the most evidence of, and transparency around, consideration of climate-related matters in their financials and audit reports, likely due to longer running dialogues with investors. These companies were the most visible in terms of providing/detailing the assumptions used, even if they did not always consider climate in those assumptions, nor align them with preferred Paris outcomes.


[1]“Climate Action 100+ is an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change”. This includes engagement with 167 focus companies, accounting for over 80 percent of corporate industrial greenhouse gas emissions. See https://www.climateaction100.org/

[2] See also: Effects of climate-related matters on financial statements (ifrs.org) and FASB Staff Educational Paper—Intersection of Environmental, Social, and Governance Matters with Financial Accounting Standards (March 19, 2021).

[3] Investor organisations representing over $103 trillion in global assets under management.

[4] Signatories represented over $9 trillion in assets under management. Some overlap with Open Letter signatories.

[5] https://www.ceres.org/news-center/press-releases/ceres-releases-investor-expectations-paris-aligned-financial-reporting.


Once embargo lifts the report can be downloaded here: https://carbontracker.org/reports/flying-blind-the%E2%80%A6ancial-reporting/

To arrange interviews please contact:

Joel Benjamin                        jbenjamin@carbontracker.org                    +44 7429 637423

Daniel Cronin                         dcronin@carbontracker.org                        1-617-678-5263


About Carbon Tracker

The Carbon Tracker Initiative is a not-for-profit financial think tank that seeks to promote a climate-secure global energy market by aligning capital markets with climate reality. Our research to date on the carbon bubble, unburnable carbon and stranded assets has begun a new debate on how to align the financial system with the energy transition to a low carbon future. www.carbontracker.org 

About the Climate Accounting Project 

The Climate Accounting Project is an informal team of accounting and finance experts drawn from the investor community and commissioned by the Principles for Responsible Investment (PRI).