A third of Australia’s biggest listed companies are keeping investors in the dark about how they are managing the potentially large financial risks of climate change, a survey has found.
Despite mounting pressure for companies to assess the business impacts of climate change and policies to contain global warming, the Australian Council for Superannuation Investors (ACSI) says 70 firms on the ASX 200 index did not make any climate-related disclosures in 2016.
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The finding comes after a powerful business taskforce reporting to the G20 last month called for sweeping changes to how much information big companies should give investors about their climate change exposure, and how they manage these risks.
ACSI has not identified the 70 businesses, as this is the first year it has conducted the survey, and exactly what is expected of companies in this area is still evolving.
Even so, ACSI chief executive Louise Davidson called for a “rapid” change to how much of corporate Australia reports on climate risks, and indicated it might name and shame businesses in future.
“It was disappointing to see that such a high number of companies did not make any climate-related exposure,” Ms Davidson said.
“I find it almost impossible to believe that all 70 of them have no significant exposures.”
To form its assessment, ACSI assessed whether ASX200 companies were reporting their greenhouse gas emissions, whether they had a carbon emissions target, and whether they had a climate policy statement.
The energy and utilities sector had the highest level of disclosure of greenhouse gas emissions, ACSI said. Photo: Paul Jones
It did not assess how well placed the firms were to deal with climate change, or technological shifts away from fossil fuels.
It found energy firms were most likely to disclose their emissions, followed by banks. These are two sectors where investors believe significant carbon risks may lie.
Chief executive of Australian Council of Superannuation Investors Louise Davidson. Photo: Josh Robenstone
However, it said only a third of the materials sector (miners) had carbon emissions reduction targets, and about a fifth of the energy sector had a target for cutting emissions.
The sectors with the worst record of climate disclosure included businesses in consumer services and telecommunications.
It was disappointing to see that such a high number of companies did not make any climate-related exposure.
A growing number of high-profile regulators, including Bank of England governor Mark Carney, have in recent years warned of the risks of financial dislocation created by “stranded assets” that are affected by climate change.
The concern is that firms such as banks and insurance companies could have big exposures to such assets, therefore posing risk across the global financial system.
Mark Carney, governor of the Bank of England (BOE),has warned of the need for greater clarity on climate change. Photo: Bloomberg
Mr Carney has also argued that financial markets need to know about firms’ climate strategies so they can allocate capital to those businesses that might be in the best position to profit from the opportunities thrown up by climate change.
A taskforce on climate-related financial disclosures, established under the G20, last month, recommended companies disclose their strategies setting out how they would be affected if global warming could be limited to an increase of no more than 2 degrees.
Domestically, the Australian Prudential Regulation Authority said in February that it viewed climate change as a “material” risk that it would be watching more closely in its monitoring of banks, insurance companies, and wealth managers.
ACSI, which represents not-for-profit superannuation funds managing $450 billion, said the lack of reporting on business risks from climate change was a serious issue for the long-term investors it represented.
“As investors, we want to know that companies have identified the risks that are important to them, and understand that they are managing them appropriately,” Ms Davidson said.