No Rhyme or Reason: Unreasonable projections in a world confronting climate change

In the US, carbon-intensive sectors have made risk factor disclosures related to climate change for years but very little of it has been decision useful. This is in part due to the general nature of “risk factor” disclosure. But it is also because few companies have focused on how policy and technological efforts to meet emissions reductions targets will impact the company. Companies themselves are best positioned to provide this. Carbon Tracker’s view is that climate targets – whether achieved by policy, technological progress, or other means – offer a clear statement of the direction of travel and level of global ambition and therefore a useful proxy for quantifying the extent of the risk. There is clear demand for better information about how different energy and emissions scenarios impact businesses, as shown by the well-supported resolutions at extractive companies last year. Regulators are also doing more thinking, with the FSB taskforce currently reviewing how emissions scenarios may be used to stress test the business models of companies. The SEC has also requested public comment in a Concept Release, which is looking at how the disclosure of risk could be improved and is asking whether current reporting on climate change is adequate. However most companies have argued that the international targets are not instructive and, in any event, cannot be evaluated without specific policy proposals. New research by Carbon Tracker challenges both of these arguments.