Investors are Flying Blind as over 70% of reviewed companies and 80% of auditors fail to disclose climate risk in the financials

This report examines whether 107 publicly-listed carbon-intensive firms (and their auditors) considered material climate-related risks in financial reporting. At the same time the study also assesses whether investor concerns about Paris-alignment of assumptions and estimates have been addressed.

Despite significant financial risks faced from the climate crisis, and net-zero pledges made by many we found little evidence that companies or their auditors considered climate-related matters in the 2020 financial statements.

Figure 1: Overall results – considerations of climate matters in financial statements and audit reports

Source: Carbon Tracker and CAP team analyses

Compared to other sectors profiled, oil and gas companies provided the most evidence of, and transparency around, consideration of climate-related matters in their financials and audit reports. 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.

Figure 2: Consistency in considering climate targets – O & G companies

Source: Carbon Tracker analysis and graphic

Key Findings

  • There is little evidence that companies incorporate material climate-related matters into their financial statements.
  • Most climate-related assumptions and estimates are not visible in the financial statements.
  • Most companies do not tell a consistent story across their reporting.
  • There is little evidence that auditors consider the effects of material climate-related financial risks or companies’ announced climate strategies.
  • Even with considerable observable inconsistencies across company reporting (‘other information’ and financial statements), auditors rarely comment on any differences.
  • Companies do not appear to use ‘Paris-aligned’ assumptions and estimates.