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KPMG survey: World’s largest companies recognise climate change as financial risk, but disclosure qualitymust improve

24/11/2020 14:29

56% of the world’s 250 largest companies (G250) now acknowledge climate change as a financial risk to their business in their corporate reporting, according to a new KPMG International survey, Towards Net Zero: How the world’s largest companies report on climate risk and net zero transition.

Companies based in France (94%), Japan (71%) and the US (54%) are the most likely to report financial risk from climate change. Conversely, less than half the largest German (47%) and Chinese (23%) companies do so. Among the major industry sectors, the oil and gas industry leads with 81% of the largest companies reporting climate-related financial risk followed by the retail (70%), technology, media and telecommunications (60%), and financial services industries (57%).

However, the survey revealed that the quality of climate-related risk disclosures among these companies needs to improve. 31% of them include a section on climate-related risk in their primary financial report or publish a separate climate risk report; only 22% of them provides scenario analysis of climate risks in line with the recommendations of Task Force on Climate-related Financial Disclosures (TCFD).

KPMG’s survey also found that around one fifth (19%) of the G250 have reported a target to achieve net zero emissions of greenhouse gases (GHGs). German companies lead when it comes to setting net zero targets (76%), followed by French (44%) and Japanese (25%) companies. Among industry sectors, net zero targets are most common among large companies in the technology, media and telecommunications (30%), and automotive (29%) industries.

Richard Threlfall, Global Head of KPMG IMPACT, said: “We should take a ‘glass half full’ view of these findings. Corporate disclosure of climate-related risks, as we currently understand it, simply did not exist five years ago. So, it is encouraging that, in a relatively short time, over half the largest companies now publicly recognise the risk and almost half have made their board responsible for managing it. That said, progress has not been uniform and there are significant variations in the quality of disclosures between different jurisdictions and industry sectors. As for those companies which are not yet focused on climate risk, they need to step up – the world has only 10 years to halve greenhouse gas emissions, and recognising the issue as a business risk is the first step to playing an active role in addressing this shared, existential challenge.”

Antonis Bargilly, Board Member at KPMG in Cyprus said:“This report provides a very useful guide for Cypriot companies regarding reporting of financial risk from climate change. Cyprus is yet to catch up on the topic, but its importance is evident throughout the results of the report. Climate change-related risks affect everyone living on the planet, so it is better to be proactive and start considering them.”

About the survey

This research was conducted in 2020 by climate change and sustainability professionals at KPMG firms. They reviewed corporate reporting by the world’s 250 largest companies (G250), as defined by the Fortune Global 500 ranking for 2019. Reporting included annual financial or integrated reports, sustainability reports, stand-alone reports and company websites published between 1 July 2019 and 30 June 2020. The researchers assessed reporting by the G250 against 12 quality criteria for good climate risk and net zero reporting. These criteria are based on the insights of climate disclosure experts at KPMG firms, combined with key elements of the Task Force on TCFD recommendations, other reporting frameworks and evolving best practice.

This research has been conducted by KPMG IMPACT, a newly-established initiative of KPMG International. KPMG IMPACT brings together professionals and subject matter experts from across KPMG’s global organisation to support the delivery of the United Nations Sustainable Development Goals.