* Investors write to 36 major companies
* Call to reflect full scope of climate risks
* Campaign builds on earlier pressure on Shell, BP, Total
* Investors watching for changes in 2020 annual reports
By Matthew Green and Simon Jessop
LONDON, Nov 16 (Reuters) - Investors are pushing major
European companies to make sure the "missing" costs of climate
change are properly reflected in their financial statements, a
move that could wipe billions of dollars off the value of
sectors from energy to aviation.
The European and U.S. investors, who manage $9 trillion in
assets, have sent 36 carbon-heavy companies a document https://www.iigcc.org/download/investor-expectations-for-paris-aligned-accounts/?wpdmdl=4001&masterkey=5fabc4d15595d
setting out how they should account for the likely impact of
the 2015 Paris climate accord on their future profits.
The investors suspect that existing balance sheets rest on
assumptions over variables such as oil prices, carbon taxes, and
the lifespan of fossil fuel assets that are incompatible with a
shift to net-zero carbon emissions under the Paris deal.
JPM Morgan Asset Management (part of JP Morgan Chase & Co
), DWS, Fidelity International and M&G
Investments were among 38 asset managers to back the
document, according to a copy of an accompanying letter https://www.iigcc.org/download/iigcc-letter-to-european-companies-on-paris-aligned-accounts/?wpdmdl=4006&masterkey=5fabc9c5af24f
shared with Reuters by the Institutional Investors Group on
Climate Change, an industry coalition.
In a statement published on Monday, the investors called on
the companies to "address missing climate change costs in
financial accounts".
"Either we get serious and start shifting capital flows
towards activities aligned with the Paris Agreement, or we
continue to talk about it," said Natasha Landell-Mills, head of
stewardship at London-based asset manager Sarasin & Partners,
who wrote the 23-page investor expectations document.
"Paris-aligned accounts are amongst the most important
changes that will drive system-wide capital redeployment,"
Landell-Mills said.
Among the companies the investors wrote to were Germany's
E.ON and Uniper, Spain's Iberdrola
and Endesa, France's Air Liquide, Austria's
OMV and London-listed Anglo American.
When contacted for comment, the companies variously referred
Reuters to existing commitments on sustainability and climate
risk disclosure, emphasised they welcomed investor engagement,
and said they needed time to study the requirements.
ACCOUNTING ASSUMPTIONS
The campaign builds on a previous initiative led by
Landell-Mills and an initial core of investors to challenge
European oil majors and their auditors over their accounting
assumptions in light of the Paris deal.
Landell-Mills said that engagement was vindicated in June
when British major BP said it would write off up to $17.5
billion from the value of its assets after revising down its
long-term oil and gas price forecasts. Anglo-Dutch rival Royal
Dutch Shell and France's Total booked smaller
impairments.
Regulators have increasingly been encouraging companies to
make voluntary disclosures of how they expect climate change to
affect their businesses, and some countries, including Britain
and New Zealand, are making these mandatory.
But the investors say that accountants and auditors may be
failing in their existing legal duties to factor in foreseeable
risks linked to both the prospect of rapid decarbonisation and
physical impacts from climate change, meaning companies may be
overstating their capital.
"Too many company accounts are leaving out material
climate-related impacts, and this is not just putting
shareholder capital at risk; it could have catastrophic
consequences for our planet," according to the investors'
document.
The document said investors could exert leverage on the
issue by engaging directly with audit committees and company
boards, by voting out directors and auditors, and by divesting
shares.
Bruce Duguid, head of stewardship at the governance advisory
arm of Federated Hermes, among the asset managers backing the
campaign, said investors would review 2020 accounts for "clear
evidence" of a response from both board directors and
auditors.
(Reporting by Matthew Green and Simon Jessop
Editing by David Holmes)