As long-term stewards of our clients' assets, we aim to drive positive change on your behalf, through our thematic investment process, active engagement, and policy outreach. Our stewardship diaries offer an insight into this work, sharing the tangible impacts of your investments.
This month, we welcome an important step forward on workers’ rights, the release of a new report on climate accounting from Carbon Tracker and announce that Sarasin has been acknowledged as a successful signatory of the FRC’s stewardship code.
Carbon Tracker’s new report reveals absence of climate risk in financial reporting
Carbon Tracker’s report released today (“Flying Blind: The glaring absence of climate risk in financial reporting”, September, 2021) should set off alarm bells. None of the 107 companies they reviewed – analysed precisely because they are likely to be materially impacted by decarbonisation – have produced financial statements that are consistent with a 2050 Net Zero carbon emissions pathway. Only 30% even made reference to climate change in their accounts.
Put another way, every one of these fossil-fuel-intensive companies is predicating their reported profitability, assets and liabilities on the world failing to control dangerous climate change. The flip-side of this conclusion is that, if these companies did produce accounts that reflected falling long-term demand for fossil-fuel-based goods and services, their reported profits and net assets would likely be lower.
While views may differ as to whether policy-makers will in the end deliver on their climate commitments, Carbon Tracker’s analysis underlines that disclosures today appear to fall short of even the legal minimum. Major US oil and gas majors are not disclosing critical accounting assumptions like the long-term oil price they use in impairment testing, without which investors are unable to properly interpret their financial statements.
Investors have already made abundantly clear their expectations that companies provide visibility of how a 2050 net zero pathway targeted by governments globally would impact their financial condition. Investors have asked auditors to alert investors where they are being misled.
Without these disclosures, it is hard to see how the financial system will ensure capital is allocated in a way that supports a safer planet.
Following intense negotiation, a new accord on health and safety for the garment industry
As responsible investors, we have long been concerned about the garment industry's treatment of its workers. We are pleased that a revised version of the Bangladesh Accord has now been signed, following months of negotiations.
In April 2021, we signed the ICCR Investor Statement Calling for Renewal of the Bangladesh Accord. The Bangladesh Accord, which was set up following the fire in Rana Plaza in 2013, was due to expire in May. It will now be superseded by the International Accord for Health and Safety in the Textile and Garment Industry, which has a greater scope than the Bangladesh Accord, which was due to expire this May. This is a key step forward for workers' rights. Over 90 clothing brands have signed the accord, including ASOS, H&M and AB Foods (the owner of Primark).
Sarasin confirmed as successful signatory to FRC’s more stringent UK Stewardship Code
The updated UK Stewardship Code now requires signatories to provide proof of their stewardship activities. It is gratifying to see that the FRC has recognised Sarasin & Partners as an official signatory, following a stringent review process which saw a third of applicants turned away.
We are pleased to see that the Financial Reporting Council is imposing stricter requirements on signatories to the code and look forward to working further with them on this important initiative.
You can keep up to date with our stewardship activities by following us on Twitter and Linkedin, and by visiting the stewardship section of our website.
If you are a private investor, you should not act or rely on this document but should contact your professional adviser.
This promotion has been approved by Sarasin & Partners LLP of Juxon House, 100 St Paul’s Churchyard, London, EC4M 8BU, a limited liability partnership registered in England & Wales with registered number OC329859 which is authorised and regulated by the Financial Conduct Authority with firm reference number 47511.
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