Miningweb - The bottom line just got hotter: Climate change comes to corporate accounting

Key topics:IASB to guide companies on disclosing climate risk in P&L accounts.Climate events now affecting revenue; investors demand integrated reporting.New guidance clarifies rules, pushing transparency in 2025 financials..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Frances Schwartzkopff.Companies will soon be expected to reflect climate risk in their profit and loss accounts, revealing to investors how floods, storms and droughts affect bottom lines.The International Accounting Standards Board, whose rules are used in some 169 jurisdictions across the globe, is due to have a finalized set of examples by October to show companies how to disclose the impact of a hotter planet on P&L items including impairments and provisions.It’s technical and may make “people’s eyes glaze over,” said Natasha Landell-Mills, head of stewardship at Sarasin & Partners, which manages $23 billion in assets. But this kind of financial rewiring ultimately “drives decision making,” she said.The development marks a step up from the standard reporting model to date, whereby companies have released financial earnings and mostly left things like climate risk to separate sustainability reports. Forcing companies to merge the two means “getting to the heart of how the system operates,” Landell-Mills said.Investors with a focus on sustainability have complained for years that corporate reporting falls short. IASB decided back in 2023 to identify what could be done to address such concerns, and in July published a draft list of examples. The shift comes as the real-world fallout from climate change becomes increasingly hard to ignore. More than half the companies surveyed by Morgan Stanley in June said their revenue took a hit due to climate-related events last year. Losses from natural catastrophes reached $318 billion, of which less than half were insured, the Swiss Re Institute estimates.Concerned about the stability of the financial system, regulators have been telling banks to increase climate-related risk assessments. This month, Commerzbank AG set aside more than $300 million in provisions to absorb possible losses from novel risks including climate change.The new IASB examples don’t add to the list of corporate reporting requirements, but clarify existing rules to allow for the impact of extraordinary developments. These could also include the fallout from tariffs introduced by the Trump administration.The board is rushing to finish its work so that investors might be able to see how the new reporting guidance feeds into 2025 financial reports, said Linda Mezon-Hutter, the IASB’s vice chair.Companies opting out will likely face investor questions, she said. And if “something happens and you are financially affected in the current period by a climate related event that you didn’t disclose, you didn’t accrue for, you didn’t even think about, that’s going to be a problem.”The US doesn’t require companies to follow IASB, but instead uses Generally Accepted Accounting Principles, or GAAP. .Read more:.Manie Marais: Investing in the US’s top companies – A guide to the S&P500.“Some of the big banks are withdrawing their commitments for sustainable finance. We’re all aware of that,” Mezon-Hutter said. “But even in our discussions,” for instance, with the Securities and Exchange Commission, “they vehemently agree with us that if there’s a material climate impact in the current financial statements, that it’s important for users to know that.” NEWS ROUNDUPEnergy Bets | Hedge funds are betting against oil stocks and winding back shorts on solar in a reversal of positions that dominated their energy strategies over the past four years..Raising Capital | Orsted A/S shares plunged a record 29% after the Danish offshore wind giant announced plans to raise as much as 60 billion Danish kroner ($9.4 billion) in a stock sale — another setback for a company once considered a flagship of the green energy transition.Lithium | Lithium prices and stocks spiked on Monday after battery giant Contemporary Amperex Technology Co. Ltd. halted operations at a major mine in China, spurring speculation that Beijing might move to suspend other projects as it tackles overcapacity across the economy. Exclusions | Danske Bank A/S is removing over 1,700 fossil fuel-related companies from its investment universe, citing their failure to prepare for climate change.Israel | Norway’s $1.9 trillion sovereign wealth fund has divested from 11 Israeli companies and is terminating all contracts with external managers in Israel following public outcry over its investments linked to the war in Gaza.Mega-Dam | China’s 1.2 trillion yuan ($167 billion) mega-dam in Tibet will face strict scrutiny to access green financing because of the potential environmental and social impacts of large hydropower, according to Sustainable Fitch.REGULATIONOut of Control | Jamie Dimon, JPMorgan Chase & Co.’s chief executive, says US financial regulations are out of control and have been taken to a whole new level.UK Mortgages | The Bank of England unveiled details of its plans to boost the mortgage market by easing the regulatory burden for smaller banks.BLOOMBERG RESEARCHSolar | Aggressive capacity expansions in solar manufacturing have led to an unprecedented oversupply. Most of the leading solar manufacturers reported heavy financial losses in 2024. (BloombergNEF)Copper | The new wave of artificial intelligence and data center buildout is reshaping copper demand. (BloombergNEF).Trump Attacks | With the signing of the One Big Beautiful Bill, President Donald J. Trump and Republicans in Congress successfully reversed many of the clean energy policies of the previous US administration. (BloombergNEF)Electric Vehicles | Ford, General Motors and Tesla are among automakers betting that lower-priced offerings will reignite demand for electric vehicles as the $7,500 US tax credit is phased out, with these carmakers bracing for a bumpy ride until more of the models roll out later next year. GM and Ford are expected to double down on LFP batteries, with the latter unveiling plans for a new line of budget EVs in a $5 billion bid for mass appeal. (Bloomberg Intelligence)Solar | Data-center power demand will likely more than double by 2028, our analysis shows, favoring fast-to-deploy solar, storage and gas, which could elevate consensus sales for First Solar, Nextracker, Shoals and other clean-energy companies. Big-Tech’s capital spending is set to drive a historic build-out of the facilities, with outlays by the five main hyperscalers poised to top $450 billion in 2026, up at least $100 billion from this year, the BI tech team calculates. (Bloomberg Intelligence)US Data-Center Power Use Orsted | Orsted’s planned 60 billion-krone (€8 billion) rights issue de-risks its balance-sheet repair program, as it more than offsets the 40 billion-krone impact from the failure to farm down Sunrise Wind and effectively completes the 70-80 billion-krone divestment plan through 2026. Funds from operations to debt may jump to 66%, from 16% in 1H, and hold above the 30% target through 2026 with further divestment proceeds of 35 billion kroner offsetting higher capital spending and a reinstated dividend in 2026. Importantly from a ratings perspective, the Danish state will participate in the rights issue to keep its stake at 50.1% — supporting the one notch of uplift assigned by S&P and Moody’s. (Bloomberg Intelligence)BLOOMBERG OPINION AND ANALYSISRare Earths | Jim Litinsky, chief executive officer and co-founder of MP Materials Corp., should be forgiven for waxing melodramatic during the rare-earth mining company’s second-quarter conference call on Thursday, wrote columnist Thomas Black.Ford | The drive from Detroit to Washington is a little more than 500 miles. When it comes to electric vehicles, though, the city and US capital aren’t even on the same roadmap anymore, and neither America’s auto industry nor President Donald Trump’s administration are the better, wrote columnist Liam Denning.FUNCTIONS FOR THE MARKETTariff Fallout | Consumers battered by tariff uncertainty, inflation concerns and high interest rates are readying themselves for more turbulence by opting for frugality and flocking to deep discount stores.Shares of Five Below and Dollar General have massively outperformed since President Donald Trump’s announcement of tariffs on “Liberation Day” in April. Analysts are bullish on dollar store revenues.Bloomberg Second Measure data analytics indicate observed sales rose for discounters, as they stalled at higher-end retailers like Macy’s. Durable good price increases have started contributing to inflation, following several months of declines..© 2025 Bloomberg L.P.

Miningweb - The bottom line just got hotter: Climate change comes to corporate accounting

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