London/New York, 22 February – 140 companies with some of the world’s highest emissions are collectively failing to explain how the climate crisis affects their existing business, with major auditors found to be equally ineffective, reveals a report from the financial think tank Carbon Tracker published today.

Investors are increasingly concerned about the financial impact of climate change and the energy transition, while market regulators and standard setters have been clear that companies should reflect the impacts in their accounts.

But companies and their auditors are leaving investors in the dark with only 40% providing some information in financial statements and audit reports, barely up on 35% a year ago.

Barbara Davidson, Head of Accounting, Audit & Disclosure and report author said: “These companies have significant exposure to climate and transition risks and most have emissions reduction targets. Such matters can materially impact their businesses, balance sheets and cash flows. Investors and regulators urgently need information about how companies are reflecting this in their financial statements today.

“If management and investors are basing their decisions on incomplete or incorrect information, such as potentially overstated assets and profits and understated liabilities, then investors, including pension funds and retail shareholders, risk significant financial loss in the face of a disorderly energy transition.”

Flying Blind: In a Holding Pattern is Carbon Tracker’s third annual report in the series on whether companies and their auditors disclose how they are considering climate change in their financial statements and audits.

It looks at 140 companies which, as part of the world’s largest corporate greenhouse gas emitters, are a focus for the Climate Action 100+ investor initiative. All are subject to similar accounting and auditing requirements and most are audited by one of the big four audit firms: Deloitte, EY (Ernst & Young), KPMG and PwC (PricewaterhouseCoopers).

It analyses their financial statements and related audit reports for their 2022 financial years,[1] using the Climate Accounting and Auditing Assessment methodology,[2] which includes metrics grounded in the existing relevant accounting and auditing standards. The report finds that:

Only 37% of companies’ financial statements provide investors with some information on how they incorporate climate-related financial risks. Investors in the remaining 63% cannot tell whether balance sheets reflect climate impacts and so “lack a window into management’s views of the energy transition”.

“81% of companies continue to omit the most basic and accessible data: the relevant quantitative assumptions and estimates [inputs] used in financial reporting.”  This is despite companies identifying these inputs as significant to the preparation of the financial statements and subject to considerable judgement and estimation uncertainty.

70% of companies’ financial statements are not consistent with their other climate narratives. “Discrepancies could be evidence of material errors, poor corporate governance or potential greenwashing.” Company climate targets may also raise concerns about greenwashing because they are “often dependent on the use of technologies that are either not developed or not available at scale, such as carbon capture and storage, with no insight into the financial statement impacts.”

Auditors lag behind companies with 80% of audit reports providing little or no information about whether they have assessed the impact of climate. Only one audit report provided all the information required – for Deloitte’s audit of BP.

Regulators, including the US Securities and Exchange Commission, the European Securities and Markets Authority, the UK Financial Reporting Council and the UK Financial Conduct Authority, have increased their focus on climate and the energy transition in financial statements. Standard-setters such as the International Accounting Standards Board and the US Financial Accounting Standards Board have confirmed that these issues should be considered when preparing company accounts.

Yet the report finds that companies and auditors appear generally reluctant to make climate-related disclosures, although those operating in Europe and the UK continue to provide more information than those in the US and Asia-Pacific. US companies frequently challenge investor requests for climate disclosures and none of the US audit reports indicated climate or the energy transition had been considered.

The report says it is crucial that management and auditors consider a range of risks and strategies that can “significantly impact a company’s business, as well as its balance sheet, profitability and forecasts of future cashflows today”.

These risks include:

  • Transition risks, such as disruptive technology, changing consumer preferences, policy action and emissions regulations, and resulting declines in demand, prices, margins or production;
  • Physical risks such as extreme weather events and temperature fluctuations, and the ensuing costs of insuring, reinforcing, replacing and or moving productive assets;
  • Related company targets and strategy, including the cost of reducing emissions, and the early retirements of carbon-exposed assets.

“Investors need to understand if companies could face significant losses in the face of such risks – including whether assets will generate the returns originally expected, if liabilities will come due sooner than anticipated, and if new ones will arise,” the report says.

It notes that the big four audit firms have committed to the goal of achieving net zero emissions by 2050, as members of the Net Zero Financial Service Providers Alliance, and that over 100 of the 140 companies have set net zero targets.

Yet it says 94% of companies and their auditors are failing to respond to investor calls for information about how balance sheets could be affected by the global drive to achieve net zero (and no more than 1.5 degrees warming).

Flying Blind: In a Holding Pattern will be followed by three further notes focusing on companies, auditors and regulators. Collectively, these make up the third Flying Blind report.


Once the embargo lifts the report can be downloaded here:

To arrange interviews please contact:

Stefano Ambrogi                +44 7557 916940

David Mason             +44 7799 072320

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.

[1] While most have 31 December 2022 year-ends, some have early 2023 year-ends.
[2] Investors use the Climate Action 100+ Net Zero Company Benchmark to assess companies’ net zero transition; this is part of that benchmark. See methodology here: