Financial analysts say regulator’s report makes it clear ‘many Australian companies are not meeting their legal requirements’
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The review, published on Thursday, examined climate risk disclosures by 60 companies in the ASX 300, in 25 recent initial public offering (IPO) prospectuses, and across 15,000 annual reports.
Of the 60 companies, Asic found 17% identified climate change as a material risk to their business.
The regulator said that while most ASX 100 companies had considered the potential risks posed to them by climate change at least to some extent, the practice of disclosing these risks to investors was “considerably fragmented, with information provided to the market in differing forms across a wide range of means of disclosure”.
“In some cases, the review found climate risk disclosures to be far too general, and of limited use to investors,” Asic said in a statement.
The review found few listed companies outside of the ASX 200 were disclosing climate risks to their investors.
Discussion of climate change in annual reports had also gone backwards, particularly for companies outside the ASX 100.
It found the percentage of annual reports of all listed companies that contained climate change-related content had fallen from 22% in 2011 to 14% in 2017.
“Climate change is a foreseeable risk facing many listed companies in the Australian market in a range of different industries,” the Asic commissioner John Price said.
“Directors and officers of listed companies need to understand and continually reassess existing and emerging risks (including climate risk) that may affect the company’s business – for better or for worse.”
He said climate change disclosure practices were still evolving and Asic would “monitor market practice as it continues to evolve and develop in this area”.
But financial analysts said the report highlights problems with Australia’s generic risk disclosure laws for companies and the understanding of how they apply to climate change.
“It shows there’s a difference between what Asic says the laws say and what companies are doing,” said Will van de Pol, a campaigner at Market Forces.
“It’s clear from this report and our financial research that many Australian companies are not meeting their legal requirements.
“It means that investors are being left in the dark about the risk to the companies that they own from climate change.”
He said it was up to investors to demand detailed risk disclosure from companies and for the regulator to take action against companies that failed to meet disclosure requirements.
Dan Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility, said the results in the review suggested mandatory reporting of climate risks might need to be considered.
“In the absence of that, this is the result,” he said. “It points to a systemic issue. Without mandatory reporting from Asic it will require a cultural change.”
He said investors should be taking action against companies that weren’t making progress.
“We’re suggesting they used the tools that they’ve got and the only ones are voting against directors and voting against remuneration,” he said.
Links
- If business leaders want to regain our trust, they must act on climate risk
- If you’re talking about drought but not climate change, you’re not doing your job, PM
- Australian firms told to catch up on climate change risk checks
- Banks warned of 'regulatory action' as climate change bites global economy
- Australian shareholders should be told of climate risk to profits, says thinktank
- Most global investors recognise financial risk of climate change, report finds
- Climate change: three of Australia’s big four banks reviewing exposure to fossil fuels
- Finance sector could face climate-risk testing, says Australian watchdog
- Big Australian banks invest $7bn more in fossil fuels than renewables, says report
- Apra says companies must factor climate risks into business outlook
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