In a world rapidly moving to a clean energy future and facing increased risk from climate-driven extreme weather events, investors are asking hard questions about whether the businesses they invest in are fit for the future. How can we avoid a collapse in asset values, as in 1929, or a crisis in trust in reporting, as in 2002?
For this report, we set out to understand what investors think about the quality of climate data and where the most critical credibility gaps lie. This report is the product of a listening tour with leaders in the investment community who use climate-related information to make investment decisions. We wanted to understand which data sets present the most challenges for investors, and where better-quality climate data would enhance investment decision-making. We also interviewed experienced executives across the investment analysis, data and audit fields who provided numerous insights for where improvements in data quality would help fill the current gap.
The message from the more than 20 investors we spoke with was unanimous: the current state of climate-related information is insufficient. Investment decisions often rely on data that is based on inconsistent methodologies and that lacks a systematic check on management biases.
This report provides a path to incorporate assurance over climate data to protect and reinforce our capital markets as companies meet the challenges of the energy transition and a warming planet. It lays out concrete steps data preparers at companies and assurers can take to improve transparency.
The report also discusses several types of disclosures that investors said would benefit from independent, third-party assurance.
Based on this input, our report lays out several opportunities to design protocols to apply assurance using existing principles and practices to improve the quality of key information used by investors.