Bank governor issues corporate climate warning

By Joe McGrath, ESG Clarity

Carney warns on the dangers to both the environment and profitability

Bank of England Governor Mark Carney has issued a stark warning to companies that have not yet acted to measure, manage and report their climate change impact.

In a speech at the inaugural Task Force on Climate-related Financial Disclosures summit, held in Japan, Carney spelled out the danger – both on the environment and their bottom line.

“Firms that align their business models to the transition to a net zero world will be rewarded handsomely,” said Carney. “Those that fail to adapt will cease to exist. The longer that meaningful adjustment is delayed, the greater the disruption will be.”

Carney said that with 200 of its companies already signed up to the TCFD, Japan stood at the top of the table for engagement. He cited the increase in “ferocious typhoons, record-breaking heatwaves and major landslides”, with Japan “already at the sharp end of a new pattern of devastating extreme weather events”.

The speech coincided with news that matches at the Rugby World Cup, currently being held in Japan, had been cancelled due to dangerous storms hitting the country.

Without more and rapid action by companies to report and show how their intended to improve their impact on the planet, the slowing and ultimate halt in irreversible climate change would not happen, Carney said.

Joanne Etherton, climate finance lawyer at ClientEarth, said the governor had been “crystal clear” that companies needed to raise their game on climate-related reporting. Disclosure is the first step to change, she said.

“Firms need to prove their strategic resilience to investors and regulators, illustrating how they are addressing the financial risks arising from climate change,” Etherton said. “The materiality of those risks is now beyond doubt.”

“The TCFD framework is now the global industry standard and to fulfil clear investor and regulatory demands, and companies’ own legal duties, it’s hard to imagine a credible excuse not to use it,” she concluded.

Carney said that like “virtually everything else in the response to climate change”, the development of a more sustainable financial system was not moving fast enough for the world to reach net zero.

“To bring climate risks and resilience into the heart of financial decision-making, climate disclosure must become comprehensive, climate risk management must be transformed, and investing for a two-degree world must go mainstream,” he concluded.