'Lip service': Call for investors to step up action on climate riskSMH 4/9/18 - Ruth Williams.
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Investors have been urged to "step up the pressure" on companies to act on climate
change as annual meeting season approaches, with a report arguing corporate
Australia is paying lip-service to the issue.
Environmental non-profit Market Forces says many of Australia's 100 biggest listed
companies are continuing to take a "superficial" approach to disclosure and action
on climate change and emissions, despite warnings by regulators and lawyers of
potential business and legal risks.
Market Forces research, to be released on Tuesday, suggests that of 74 ASX100
companies in sectors dubbed "high risk" for climate change impacts - as defined last
year by a G20-led task force on climate risk disclosure - only 55 per cent identified
climate change as a material business risk, and more than 80 per cent did not have
a plan to reduce their own emissions
Almost 40 per cent of ASX100 companies studied had increased their emissions over
the past year, the Market Forces research said.
The NGO - which is affiliated with Friends of the Earth - has urged investors to
"escalate" climate change as an issue in their discussions with companies, and
divest shares in companies that are "unable or unwilling" to align with the goals of
the 2015 Paris climate agreement. "There is a growing recognition of climate risk,
but few companies are actually undertaking the hard yards to fully address the
issue," Market Forces analyst Will van de Pol said.
The Market Forces research comes as the new Morrison government grapples with
internal divisions on its approach to climate change, emissions and the Paris
agreement. New Defence Minister Marise Payne is attending the Pacific Islands
Forum this week where climate change is expected to be a major topic of discussion.
It also comes as regulators consider how climate change may impact the financial
system, with the Australian Securities and Investments Commission (ASIC) assessing
how ASX300 companies disclose climate change risks, and the Council of Financial
Regulators - which includes ASIC, the Australian Prudential Regulation Authority
(APRA), the Reserve Bank and federal Treasury - creating a working group on the
issue. ASIC has said company directors should take seriously warnings that they risk
future legal action if they fail to consider risks related to climate change.
A third of companies studied "explicitly encourage" emissions reductions through
their executive or director bonus schemes, Market Forces said, a number that had
doubled since Market Forces' last examined the issue in March. But just three
companies - South32, AGL and Stockland - had started reporting climate risks in line
with the so-called "TCFD" rules nailed down by the G20's task force last year, which
have been endorsed by major companies and investors. Another four companies -
Commonwealth Bank, BHP, Westpac and ANZ - "came close" to fully adopting the
TCFD recommendations, Market Forces said, while others had promised to do so for
their 2019 reporting.
The TCFD recommendations are anchored on the Paris agreement's pledge to keep
global warming to well below 2 degrees. In July, the Australian Securities Exchange's
corporate governance council - in proposed new guidelines - said companies should
boost their disclosure of climate change risk, including reporting with the TCFD rules
if they had "material exposure". The Market Forces research found that while 65 per
cent of companies studied unequivocally accepted climate science, 27 per cent were
unclear in their language and 8 per cent had not formally acknowledged the science
of climate change. In June, research from the Australian Council of Superannuation
Investors found that 22 ASX200 companies had adopted or promised to adopt the
TCFD rules while 10 more were "reviewing" them.
Mr van de Pol pointed to South32 as a company that was "getting it right, coupling
detailed climate risk disclosures with action to reduce exposure". But he questioned
why ASX Ltd was not following the suggestions of its own corporate governance
council in not disclosing detailed climate risk information, saying the listed company
was exposed to climate risk because "high risk-exposed mining, materials and big
financial companies dominate the ASX".
ASX Ltd said it was "difficult to conclude" the company had a material exposure to
listed companies directly at risk to climate change, given ASX Ltd was a "diverse,
service-based organisation". The technology sector was its fastest growing sector, it
said. It would comply with the corporate governance council's recommendations on
an "if not why not" basis once they were finalised, ASX Ltd said.
Whitehaven Coal was among the lowest-scoring companies in the Market Forces
research, which found that the coal miner - a vocal proponent of "High Energy Low
Emission" (HELE) coal fired-power stations - had not disclosed any risks it may face
from climate change or listed it as a material business risk. Market Forces has
launched shareholder resolutions against Whitehaven Coal ahead of its AGM in
October, calling on the company to ensure its strategy was "consistent" with the
Paris agreement. The vote would be a "litmus test" on investors' willingness to push
companies on climate, Market Forces said.
Whitehaven has said it will recommend shareholders vote against the resolutions.
"We are not going to pre-empt the proceedings of the AGM," a Whitehaven
spokesman said when asked for comment. "We will recommend shareholders not
support resolutions requisitioned by shareholders representing 0.0016 per cent of
the company's shares on issue for the sole purpose of supporting Market Forces'
ongoing anti fossil fuels campaign." It did not comment on Market Forces' research.
In the past two years, Market Forces has coordinated a series of shareholder
resolutions pushing companies including QBE, Santos and Oil Search to disclose
more about climate risks. None of the resolutions have been successful, but they
have won the backing of some major investors, with the QBE resolution in May
attracting more than 18 per cent support. The step up in the number of such agenda
items, from Market Forces and others, has met with frustration from some boards
and the body representing investor relations professionals, partly due to the time
and resources they say it takes for companies to deal with them. Companies
targeted have urged shareholders not to vote for them.
i) Is climate change relevant to how directors carry out their
ii)How can shareholders make a difference to how a company is
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