The majority of companies do not take into account the financial risks of the climate crisis

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Environmentally conscious investors increasingly take climate risks into account in their investments, which puts serious pressure on businesses. According to EY’s analysis, this trend has already been recognized by decision-makers, which proves that sustainability aspects prevail more strongly in corporate strategies than a year ago (it rose to 85 percent from last year’s 70 percent). In the UK, for example, 99% of companies already include information on the effects of climate change in their reports. However, the quality of company reports on the financial risks of the climate situation (43%) is spectacularly below the recommended level. In Central and Eastern Europe, despite the 10 percent improvement (34%), the quality of the reports remained well below the global average. This is due to the fact that, while more and more companies are reporting on the risks and even formulating meaningful steps to manage them, they cannot provide any quantifiable information, or only very limited information.

“Businesses are talking much more openly about the dangers of climate change, but they still do not provide adequate answers to these problems, while investors and their customers expect the same from them,” pointed out Ákos Lukács, head of the EY Sustainability and Climate Change Services Business Unit. “The central bank will also pay special attention to eliminating the lack of data related to climate risks, so domestic companies may soon be forced to take action,” he added.

According to the study, there is already some progress in other areas

Almost half of the surveyed organizations (49%) performed a scenario analysis, which can help prepare for the negative effects of climate change. Three-quarters of the respondents (75%) prepared a risk assessment, and six out of ten companies (61%) published their decarbonization strategy. In Hungary, the Budapest Stock Exchange will soon launch a new program that will help domestic small and medium-sized enterprises to operate sustainably.

“More and more companies around the world are trying to adapt their business and sustainability strategies to the effects of climate change. Regardless, the fact remains that less than a third of companies report on climate considerations in their financial statements, indicating that further action is urgently needed. We find that many companies set extremely ambitious climate goals for themselves, while not having a clear action plan to achieve them. Even though they make their activities look green, with this tactic they can only improve their reputation in the short term, which can quickly backfire later,” added Ákos Lukács.