Press release: 18 August 2021

ClientEarth files complaints against Just Eat and Carnival over climate failings

ClientEarth has reported two UK listed companies, technology firm Just Eat Takeaway.com and cruise travel company Carnival, to the UK’s financial services regulator for failing to report on climate change risk to their investors, in breach of their legal requirements.

Both the food delivery platform and cruise line operator claim to be taking steps to lower their environmental footprint, yet neither are clearly addressing the challenges that the climate crisis and low-carbon transition present to their businesses.

Following analysis by ClientEarth lawyers into inadequacies with climate-related disclosures by the largest 250 UK companies from 2019-2020, they identified Just Eat and Carnival as among the worst offenders in this year’s reporting.

ClientEarth argues that both companies’ reporting failures are a breach of their legal requirements under UK company law to disclose material risk to investors.

The environmental law charity has asked the Financial Conduct Authority (FCA) to refer both firms for investigation and finally close the accountability gap across the sectors it regulates.

ClientEarth lawyer Maria Petzsch said: “Just Eat and Carnival are not immune to the impacts of climate change. Recent global efforts to phase out fossil fuels and single-use plastics, shifts in consumer behaviour, and abrupt changes to regulatory and business environments all present very real challenges to their financial and operational health.

“These impacts are material to investors, who expect to be given the full picture. As market leaders in highly exposed sectors, Just Eat and Carnival are in a strong position to lead by example and tackle climate risk head on – but they have to get their act together.”

Key findings from Just Eat’s 2020 reporting include that it:

• Makes no reference to climate change.
• Provides limited commentary on environmental impacts and opportunities, including reducing food packaging along its supply chains, particularly plastics, and the end to end emissions associated with manufacturing plastic packaging.
• Risks “greenwashing” investors by giving a potentially misleading impression of how resilient to climate change it is, and by appearing to position itself as “sustainable” without disclosing a Paris-aligned strategy, or aligning with emissions reduction commitments in the countries where it operates.

Key findings from Carnival’s 2020 reporting include that it:

• Makes no reference to climate change in the Carnival Corporation and Carnival plc consolidated annual report.
• Makes only vague statements about climate change in its strategic report, and does not include any concrete analysis of climate impacts on its business model.
• Includes potentially misleading information on how it intends to achieve its commitments to decarbonisation by failing to give investors information, among other things, about the negative environmental impacts associated with transitioning to fossil gas – presented as a core component of its climate transition plan.

The referrals highlight the ongoing and hugely problematic lack of enforcement action taken to date by the FCA to hold businesses accountable for these kinds of infringements, which are already endemic across the corporate sector as companies seek to address existing and new climate-related disclosure requirements.

In recent years, the FCA has ignored multiple complaints lodged by ClientEarth highlighting examples of non-compliance.

In a letter to the regulator sent today alongside the referrals, ClientEarth lawyers warn that the FCA’s continued failure to secure compliance is unacceptable and puts it at risk of breaching its own statutory objectives.

They argue that the FCA’s current inaction is out of kilter with its new remit from the Treasury on climate change, and leaves it open to legal challenge.

“The FCA risks its own integrity as a regulator, and that of the UK economy. Future regulation may simply be ignored if the FCA continues to turn a blind eye to inconsistencies in climate reporting,” Petzsch said.

“It must show now that it is serious about enforcing against laggards if it is to fulfil its remit on climate change, and deliver on its promise to deliver a sustainable financial system.”

The referrals also put Just Eat and Carnival’s respective auditors, Deloitte and PwC, on notice for failing to address climate risk in their audits of the companies’ financial statements.

“If auditors continue to give the stamp of approval to annual reports that ignore the climate risks to investor capital then their trust value will depreciate,” Petzsch said.

“Auditors must take proper account of climate risk transparently, and consistently, for investors to keep faith in the quality of audits. This is the only way investors can determine how to achieve the massive reallocation of capital required to achieve the net zero transition.”

ENDS

Notes to editors:

• The referrals brought to the FCA are against (i) Carnival plc and Carnival Corporation, and (i) Just Eat Takeaway.com N.V. Both Just Eat and Carnival plc are listed on the London Stock Exchange (LSE). Shares linked to Carnival Corporation also appear to be trading on the LSE.
• ClientEarth alleges that Carnival plc and Just Eat Takeaway have breached several provisions of the Disclosure Guidance and Transparency Rules and Listing Rules in the FCA’s Handbook.
• Proper oversight of climate risk and climate change-related reporting falls squarely within the FCA’s statutory objectives and remit to make markets function well, protect consumers, enhance financial market integrity and promote competition.
• The FCA should also have regard to the government’s commitment to achieve a net-zero economy by 2050 under the Climate Change Act 2008 (Order 2019) when considering how to advance its objectives and discharge its functions.
• It is at the FCA’s discretion whether or not it refers Just Eat and Carnival for investigation.
• In 2018, ClientEarth reported Admiral Group plc, Lancashire Holdings Ltd, and Phoenix Group Holdings to the FCA for failing to adequately report climate risk. It also reported Balfour Beatty plc, Bodycote plc, EnQuest plc, and EasyJet plc to the Financial Reporting Council.
• Neither regulator made a public finding of non-compliance.
• ClientEath’s letter to the FCA is available here.

About ClientEarth

ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.