Several pension funds across Europe are part of a group of investors that have sent a letter to 17 of Europe’s largest companies asking why expectations over climate-related accounting disclosures have failed to be met.

The 34 members of the Institutional Investors Group on Climate Change (IIGCC), representing USD 7.1trn in assets, includes Danica Pension, ERAFP, Nest and USS, among others. Sent ahead of 2022 company AGMs, the letters’ signatories warn of the possibility of increased voting against Audit Committee directors’ appointment if expectations are not met.

Part of an ongoing campaign to seek visibility of how accelerating decarbonisation could impact companies’ financial position, the letters follow previous letters and a copy of ‘Investor Expectations for Paris-aligned Accounts’ sent to 36 companies in November 2020.

The latest letters are copied to lead audit partners for each company to underscore the auditors’ responsibility to alert shareholders to potential misrepresentation where material climate risks are left out of the accounts. The Big Four audit firms have also been contacted separately in recent months in the UK, US and France with investor expectations on climate accounting.

The 17 companies that received letters were: Air Liquide, Anglo American, Arcelor Mittal, BMW, BP, CRH, Daimler, Enel, Equinor, Glencore, Renault, Rio Tinto, Saint-Gobain, Shell, ThyssenKrupp, TotalEnergies and Volkswagen.

The latest investor letters state: “We lack the required visibility to give us confidence that the economic impacts from climate change and associated policy action are being properly accounted for. We have little understanding of how [company]’s financial position might be impacted by accelerating decarbonisation associated with a 1.5°C pathway.”

Commenting, IIGCC CEO, Stephanie Pfeifer, said: “Climate change poses a material risk to companies all around the world, but when it comes to their financial statements it is frequently understated or completely ignored altogether. Important matters, such as physical impacts or the potential for further regulatory change and what this could mean in terms of stranded assets or any other material outcomes, are routinely failing to be disclosed.

“How can companies who are fundamentally intertwined with the long-term fallout of climate change, such as those in the fossil fuel industries, be missing such a material risk in their financial reporting? Investors are waking up to this question and appear increasingly prepared to use their votes in reappointing Audit Committee directors to make their point.”

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