Australian firms must do more on climate change risks, says report

Mar 04, 2019
Despite push from investors and regulators, companies are not improving

Australia’s biggest companies still have to fully grasp calls from regulators and investors to do more to mitigate the risks of climate change, according to a new study by environmental campaign group Market Forces.

The group finds that a little more than half (57 percent) of companies identify climate change as a material business risk and just 32 percent disclose detailed discussions of specific climate risks and opportunities facing their business.

Market Forces released its first report, ‘Investing in the Dark’, in March 2018, with the new findings addressing announcements and changes from companies that have reported or updated disclosures in the last year. Market Forces analyst Will van de Pol says: ‘Despite a push from investors and regulators about climate change risks, on most metrics there has been almost no progress to report.’

The Market Forces study finds that just 14 percent of Australia’s top 100 companies have disclosed detailed scenario analysis demonstrating their viability in a ‘2º policy pathway’. This is a marginal improvement on the 10 percent recorded in March 2018.

Only 24 percent have a clear plan to reduce greenhouse gas emissions, up from 16 percent a year earlier. Van de Pol says investors should demand companies produce ‘Paris-aligned transition plans’ and ‘divest from those that cannot or will not.’

This is a trend among major Australian companies, as the Market Forces study follows a report from the Australian Securities and Investments Commission (Asic) in September 2018 that found that out of 60 listed companies in a sample of the ASX 300, just 17 percent identified climate risk as a material risk to their business. The Asic report found in some cases ‘climate risk disclosures to be far too general, and of limited use to investors.’

The Market Forces study also comes on the back of global guidelines to help investors understand their financial exposure to climate risk and help companies better disclose this information. The G20-backed Task Force on Climate-related Financial Disclosures guidelines, released in June 2017, take into account the Paris Agreement’s pledge to keep global warming to below 2ºC.

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