“For many companies, climate change poses a material risk to shareholder returns so we expect to see investors stepping up to the plate to hold companies to account.”
The research follows last year’s release of guidelines nailed down by the G20’s Financial Stability Board taskforce on Climate-related Financial Disclosure, known as the TCFD, which have been endorsed by big investors world-wide and companies including BHP, AGL and National Australia Bank.
The guidelines push companies to disclose climate change risks using different scenarios for how the world may deal with climate change, focusing on the Paris agreement’s pledge to keep global warming to “well below” 2 degrees.
Regulators in Australia and elsewhere have been warning of the risks posed by climate change to the global financial system, with the Australian Prudential Regulation Authority encouraging financial institutions to run stress tests on climate risk scenarios. But the Market Forces research shows that that only 10 of the 73 companies examined had published some form of scenario analysis.
Among the companies examined, Mr Gocher said AGL, BHP, Santos, South32 and Aurizon had made most comprehensive public disclosures, while among the big four banks Westpac and ANZ were “marginally ahead of the others”. But Market Forces highlighted many companies it says need to improve, including petrol retailer and supplier Caltex – among many that had not yet disclosed emissions reduction plans or targets – supermarket giant Woolworths, which had not yet produced scenario analysis or an emissions reduction plan; and financial institutions including Bendigo and Adelaide Bank; which had not disclosed potential risks and benefits posed by climate change to the company’s operations or discussed whether climate change posed a material risk.
Some of the companies have promised more disclosure soon. Caltex said it would be disclosing a “range of actions” related to climate risk in its upcoming annual report, while Woolworths said had already pledged to do more work “assessing the impacts of a two-degree world and their applicability to our group”, saying more would be disclosed in its 2018 Corporate Responsibility Report.
Bendigo and Adelaide Bank pointed to its long-time disclosure of carbon emissions and its practice of not lending to projects in the coal and coal seam gas sectors. “The above actions have come about as a result of ongoing discussions within the group about the potential of climate change to impact our business and we will continue to have these discussions,” it said.
The Australian Securities and Investments Commission is currently monitoring companies’ climate risk reporting practices, with the Turnbull government last week backing, in principle, a senate committee recommendation that ASIC review its guidance on risk reporting to ensure it adequately reflected “evolving asset measurement implications of carbon risk”.
The Market Forces research assesses companies’ disclosure across eight measures, including whether they had released a carbon emissions target and a plan for how those reductions would be achieved, who in the company carried responsibility for climate change risk, and whether the company considered climate change to be a material risk.