Connect with us

Business

Investors tell Big-4 auditors they risk AGM rebellion over climate accounting

Published

on

November 2, 2021

By Simon Jessop and Carolyn Cohn

GLASGOW/LONDON (Reuters) – Major investors have warned the world’s top four audit firms they will vote to stop the firms working for the companies they invest in at AGMs from next year if audits do not integrate climate risk.

The challenge, laid out in letters from an investor group managing around $4.5 trillion that were seen by Reuters, marks an escalation in the group’s efforts to ensure investors were armed with robust information.

Advertisement

The investors have been pushing auditors to improve for several years amid concern they were misrepresenting the true health of companies by not factoring in potential hits from the impact of climate change and associated policy changes.

Ahead of the COP26 climate talks in Scotland, the group had called for governments to force companies and auditors to file accounts in line with the world’s goal of limiting global warming by mid-century.

The letters dated Nov. 1 and sent to Deloitte, EY, KPMG and PwC by the investor group pointed to recent research showing more than 70% of assessed 2020 audits had fallen short.

The group includes asset managers Sarasin & Partners, Pictet and Aviva Investors and pension schemes including RPMI Railpen. The investors said that after three years of discussions with the firms, they “cannot afford to wait another three years” for audits to improve.

At the next season for corporate annual general meetings, the auditors could “increasingly expect to see” investors vote against their reappointment if they failed to meet expectations, the letters said.

Advertisement

In the letter to Deloitte, for example, the group said the auditor was responsible for 19 of the companies assessed in the research, including oil major BP, miner Glencore and building materials company CRH.

“While we have identified some welcome signs of leadership, notably at BP, based on our analysis overall these audits have not met our expectations,” the letter said.

“Outside the UK, the picture is worse. Of the remaining 16 audits undertaken by Deloitte, only three mention climate risk. None provides the visibility we seek on the potential financial implications of a 1.5C pathway, which global leaders have committed to delivering.”

Paul Stephenson, managing partner audit & assurance at Deloitte, said the auditor agreed that “climate-related risks should be accounted for and disclosed appropriately in annual reports and financial statements.

“We are clear that along with investors, professional bodies, regulators, standard setters and audited entities we have an important role to play in enhancing confidence in the information provided to markets,” he said.

Advertisement

CHALLENGING

Cath Burnet, Head of Audit at KPMG UK, said the firm had trained all its auditors last year on the impact of climate change risk on companies, in addition to the accounting and reporting implications.

“Our role as auditors includes challenging the recognition and measurement that climate has on the financial statements, as well as challenging narrative where it is misleading or inconsistent,” she said.

A PwC spokesperson said that “to increase transparency in this area, our future audit opinions on larger UK listed companies will further explain how material climate-related risks have been addressed. 

“We welcome investor engagement in this area which will help drive company disclosure and the setting of clear climate related goals.”

Advertisement

EY said in an emailed statement that the firm’s audit teams “continue to consider the risks that climate change brings to the companies we audit, where it relates to financial reporting.

“We are actively involved in developing standards and are supportive of ongoing work to establish a framework that companies and auditors can report against which would provide more consistent reporting for investors.”

The world’s leaders meet in Glasgow this week aiming to accelerate climate action in an effort to cap global warming at no more than 1.5 degrees Celsius above pre-industrial norms by mid-century.

After first writing to the Big Four audit firms in 2019, the investors said structural changes linked to climate change and associated policy action were accelerating, citing a recent United Nations report that issued “code red for humanity” over climate change.

“This is driving a more robust policy response globally,” the latest letters said.

Advertisement

“Auditors that fail to test accounting assumptions taking these structural shifts into account are, in our view, failing in their duty to shareholders.”

(Reporting by Simon Jessop; editing by Philippa Fletcher)

Continue Reading
Advertisement

Business

Yen shines, Aussie sags as Powell turns hawk despite Omicron uncertainty

Published

on

December 1, 2021

By Kevin Buckland

(Reuters) – The safe-haven yen held steady on Wednesday, while the risk-sensitive Australian dollar languished near a one-year low after Federal Reserve Chair Jerome Powell signalled a faster taper of stimulus despite the risks around the Omicron COVID-19 variant.

Investors fear that hasty monetary tightening could choke off the nascent economic recovery, with little still known about Omicron’s potential to evade current vaccine protection or how deadly it might be.

Advertisement

“Investors are staying cautious,” said Shusuke Yamada, chief Japan FX strategist at Bank of America-Merrill Lynch.

“It’s very difficult to make a judgement about the impact of Omicron when we don’t have a lot of information.”

Global markets fell sharply on Tuesday after the head of drugmaker Moderna said existing COVID-19 vaccines would be less effective against the new variant, although BioNTech’s chief executive struck a cautiously positive note, saying the vaccine it makes with Pfizer would likely offer strong protection against severe disease from Omicron.

The Aussie weakened 0.12% to $0.71245 after dipping as low as $0.7063 of Tuesday for the first time since Nov. 3, 2020. The New Zealand dollar was largely flat at $0.68195 after also touching the lowest since early November of last year at $0.6773 in the previous session.

The greenback ticked 0.09% higher to 113.26 yen, but still within sight of an overnight low of 112.535, a level not seen since Oct. 11.

Advertisement

Powell said in testimony to Congress on Tuesday that Fed officials will discuss at their Dec. 14-15 policy meeting whether to end bond purchases a few months earlier than had been anticipated. The Fed chief finally did an about face on a long-held contention that inflation would be “transitory.”

Powell expressed confidence that the impact from Omicron will be far less than in the spring of 2020, when the pandemic erupted.

In response, traders wound up interest rate hike expectations, with money markets now almost fully priced for tightening at the June meeting.

Powell’s testimony continues later Wednesday.

“Powell’s unexpectedly hawkish tone overnight, essentially asserting that inflation risk has primacy over growth/Omicron risks, should leave the (dollar index) forging ahead,” Westpac strategists wrote in a client note.

Advertisement

The index, which measures the dollar against six major peers, traded at 95.921 after sliding to 95.544 on Tuesday for the first time since Nov. 18, weighed down largely by an unwinding of bearish bets on the euro, the most heavily weighted component in the basket.

Westpac recommends buying dips in the index down to the mid-95 level.

The single currency slipped 0.04% to $1.1331, down from a two-week high of $1.1387 overnight.

Sterling traded not far from an 11-month low of $1.31945 reached overnight, last changing hands at $1.32955.

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)

Advertisement

Continue Reading

Business

OPEC+ begins two days of talks amid oil rout

Published

on

December 1, 2021

LONDON (Reuters) – OPEC and its allies begin two days of meetings on Wednesday to decide whether to release more oil into the market or restrain supply amid an oil price rout and fears the Omicron coronavirus variant could weaken global energy demand.

Oil prices fell to near $70 a barrel on Tuesday from as high as $86 in October, posting their biggest monthly decline since the outset of the pandemic, as the new variant raised fears of a supply glut.

For November, Brent fell by 16.4%, while WTI fell 20.8%, the biggest monthly fall since March 2020.

Advertisement

“The threat to oil demand is genuine,” said Louise Dickson, senior oil markets analyst at Rystad Energy. “Another wave of lockdowns could result in up to 3 million bpd (barrels per day) of oil demand lost in the first quarter of 2022.”

Also pressuring prices, Federal Reserve Chair Jerome Powell said the U.S. central bank likely will discuss speeding its reduction of bond purchases amid a strong economy and expectations that a surge in inflation will persist.

The Organization of the Petroleum Exporting Countries (OPEC) will meet on Wednesday after 1300 GMT, followed by a meeting on Thursday of OPEC+, which groups OPEC with allies including Russia.

Several OPEC+ ministers, including from Russia and Saudi Arabia, have said there was no need for a knee-jerk reaction from the group.

But some analysts have suggested OPEC+ might put plans to add 400,000 barrels per day (bpd) to supply in January on hold.

Advertisement

The group was already weighing the effects of last week’s announcement by the United States and other countries to release emergency crude reserves to temper energy prices.

OPEC+ has been gradually winding down record supply cuts of 10 million bpd implemented last year and currently has some 3.8 million bpd of reductions still in place.

The increase in OPEC’s oil output in November has again undershot the rise planned under a deal with allies, a Reuters survey found.

(Reporting by OPEC team, writing by Dmitry Zhdannikov, editing by Richard Pullin)

Advertisement
Continue Reading

Business

New York accuses Amazon of backsliding over worker safety, seeks monitor

Published

on

December 1, 2021

By Jonathan Stempel

NEW YORK (Reuters) -New York state’s attorney general on Tuesday asked a state judge to appoint a monitor to oversee worker safety at an Amazon.com Inc fulfillment center in New York City, citing the retailer’s alleged rollbacks of COVID-19 safety measures that were “already inadequate.”

Letitia James, the attorney general, also wants a court order requiring the rehiring of Christian Smalls, who Amazon fired for allegedly violating a paid quarantine by leading a March 2020 protest over conditions at the Staten Island facility.

Advertisement

James, a Democrat running to become New York governor, sued https://www.reuters.com/article/us-amazon-com-complaint/new-york-attorney-general-sues-amazon-over-covid-19-shortfalls-idUSKBN2AH0C2 Amazon in February in a New York state court in Manhattan over its safety protocols for thousands of workers at the Staten Island facility and a distribution center in the New York City borough of Queens.

She said Amazon is valuing profit over safety and “acting as if the pandemic is over” by rolling back safety protocols even as the Omicron variant https://www.reuters.com/business/healthcare-pharmaceuticals/omicron-variant-could-outcompete-delta-south-african-disease-expert-says-2021-11-30 of the COVID-19 virus threatens to increase transmission rates.

The alleged rollbacks include making the Staten Island facility “mask-optional” for vaccinated workers while not requiring masks for unvaccinated workers, and failing to enforce social distancing.

In her motion for a preliminary injunction, James said the proposed monitor would oversee upgraded cleaning, hygiene and social distancing procedures.

“While case rates, hospitalizations, and deaths rise, Amazon rescinds protections and packs in more workers for its holiday rush,” James said in her motion. “Amazon’s ongoing – and worsening – failure to protect workers must be halted.”

Advertisement

Amazon said in a statement it has taken a “comprehensive approach” to COVID-19 safety.

“It’s disappointing that the Attorney General is seeking to politicize the pandemic by asking for ’emergency’ relief now despite having filed this lawsuit nine months ago,” Amazon said.

The Seattle-based company is appealing a judge’s refusal in October to dismiss James’ lawsuit.

Amazon on Nov. 15 reached a separate settlement with California https://www.reuters.com/legal/government/amazon-settles-california-claims-it-concealed-covid-19-cases-workers-2021-11-15 over claims it violated a state “right-to-know” law by concealing from warehouse workers and local health agencies the numbers of workers being infected with COVID-19.

(Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis and Stephen Coates)

Advertisement

Continue Reading
Advertisement

Trending