Mark Carney has re-emphasised his support for the idea that
oil companies reserves could be stranded assets
still valued by investors, but ultimately going to embody
The vast majority of reserves are unburnable, the
Bank of England governor said if the world is to avoid
catastrophic climate change.
Thinking of hydrocarbon deposits as stranded assets has gained
prominence in recent years, helped by movements like the US
student drive to persuade university endowments to disinvest
from fossil fuel companies.
Climate science indicates that if the world is to cut CO2 emissions enough to avoid disastrous global
warming, all the worlds already discovered oil reserves
cannot be burnt. Yet such reserves still constitute a big part
of the value of companies like ExxonMobil and BP and few
large investment firms have yet accepted the stranded cost
That makes Carneys stance which he has aired in
public before unusual and bold among leading, mainstream
Carney was speaking at a World Bank seminar on Friday on
integrated reporting. This is the idea backed by the
World Bank that companies and public bodies should
include in their annual reports, not just statutory financial
information, but a holistic account of their business strategy
and how it relates to stakeholders of all kinds, now and in the
With the right information [for example, on how a
companys business interacts with environmental needs],
all groups can express their view, and influence the allocation
of capital and credit today, Carney said.
The value of integrated reporting, he argued, was to help
investors think about not just things that can be managed
in the short term but also costs companies are
likely to be exposed to as policy responds to challenges
like climate change.
He referred to a tragedy of horizons the
market failure by which actors including some investors,
companies and governments are not looking far enough ahead to
coming problems like the environment, even though these are
known to them.
Carney became interested in integrated reporting partly because
of an initiative called the Enhanced Disclosure Task Force.
This private sector venture, begun in 2011 by the Financial
Stability Board, was a collaboration between banks, investors
and rating agencies to do the right thing, in the
words of Russell Picot, group chief accounting officer at HSBC
by providing higher quality and more relevant
information about banks, in a bid to restore trust in
The EDTF made 32 recommendations, most of which have now been
implemented by the worlds biggest banks. And HSBC has
become enthusiastic about integrated reporting.
Paul Druckman, CEO of the International Integrated Reporting
Council, said: I like to describe integrated reporting as
looking at an organisation through the doorway of its strategy
rather than the weeds of its data.
Financial statements would always be necessary, agreed Mark
Vassen, global head of International Financial Reporting
Standards, the accounting norms used in 110 countries, but:
We have come to a realisation that IFRS has created
benefits, but that is only one dimension of what is needed. We
need something on top to assess the sustainability of business
Druckman said integrated reporting should address six kinds of
capital: financial and manufactured the usual domain of
accounting; natural and social often covered in
corporate social responsibility reports; but also intellectual
BNDES, the Brazilian development bank, is promoting the idea
too the first meeting it held a year ago attracted 17
companies. One this August drew 216.