Kenneth Hayne's blunt warning to company directors will register: directors can’t hide behind confused politics and “culture wars” to evade their duties to act on climate change because the law and the science are clear.
The message of Kenneth Hayne’s dramatic intervention in the climate debate is clear.
Company directors can no longer hide behind flaky excuses – such as the difficulty of shifting fossil fuel-heavy industries to clean energy, the lack of political consensus or an imaginary lack of scientific consensus – for failing to take account of climate risks and failing to tell investors what steps they are taking to reduce those risks.
Hayne pointedly attributes these bad habits to a state of “learned helplessness” – directors convincing themselves that it’s all too hard or that Australia’s small economy can’t shift the dial on a global problem – and “entrenched short-termism”.
He doesn’t single any company out, but examples abound. On Friday, Washington H Soul chairman Robert Milner shut down the annual meeting to duck questions on the climate risks facing the company’s coal mining subsidiary New Hope Corp.
Hayne’s blunt speaking and national profile ... will ensure the remarks reach a wide audience. Directors will sit up and take notice.Last week, BlueScope Steel chief Mark Vasella declared there was no commercially viable alternative to using coking coal to make primary steel, focusing on the short term when he should have declared that BlueScope would embrace new low carbon steelmaking technologies being developed in Europe as soon as they became viable.
Rio Tinto and Fortescue Mining have made excuses for not matching BHP and Vale’s pledge to set goals or targets for customers’ carbon emissions, known as scope 3, as well as their own scope 1 and 2 emissions (though Rio is working with China's largest steelmaker on emissions reductions).
Hayne’s message is shared by a broad group of senior financial regulators, investors, bankers, top federal public servants, insurers and lawyers with whom he attended a business roundtable on climate risks organised by the Centre for Policy Development two weeks ago, and a similar event in February.
But Hayne’s blunt speaking and national profile as a former royal commissioner and High Court judge will ensure the remarks reach a wide audience. Directors will sit up and take notice.
Conclusions from the roundtable, prepared by the CPD and not signed off by participants, say directors can no longer afford to take action in their own sweet time because climate risks are “ratcheting” and the obligation to counter them is mounting.
The situation is especially hazardous for Australian businesses which are “at increasing risk of retaliatory action from other countries because of a perceived view that Australia is not pulling its weight when it comes to reducing emissions”.
Alcoa's plan to shut high-cost, high-emissions smelters such as Portland is one example.
There is a template for reporting climate risks – the Task Force on Climate-related Financial Disclosure – but compliance is patchy and insufficient.
Look no further than Whitehaven Coal or New Hope’s “with one leap he was free” reporting, which assumes rapid, long-term growth in thermal coal consumption in Southeast Asia.
TCFD reporting will eventually become mandatory, and directors will need to rigorously comply as part of their efforts to “pull forward the transition” to a zero carbon real economy.
The law and science are clear
Conclusions from the roundtable note that collaboration between the private sector and government “is happening globally ... but must also happen domestically” and helpfully suggests that this “could be co-ordinated by a central Commonwealth government department”. If only we had such a department!
Hayne’s final point is that directors can’t hide behind confused politics and “culture wars” to evade their duties to act on climate change, because the law and the science are clear.
They must recognise the nature and extent of their climate risks and the speed at which change must be made, develop a strategic plan and “report about what they have done, are doing and will do in response”.
The choice for the board is between “responding or having a response thrust upon the company”.
And the kicker? Look at the financial losses of banks whose boards put profit before risks that they mistakenly thought were “non-financial”.
Links
- Directors' climate liability exposure increasing 'exponentially'
- Climate litigation could become like tobacco actions: Martijn Wilder
- Climate Change and Directors’ Duties (pdf)
- (AU) Activism And Secondary Boycotts
- (AU) Morrison Is Being Transparently Political In Targeting Climate Groups
- Company Directors May Be Headed For Litigation Over Climate Change
- ASIC Issues Updated Guidance For Directors Seeking To Avoid Climate Lawsuits
- Climate Activists Turn To Lawsuits To Force Action On Global Warming
- Directors Are In The Crosshairs Of Corporate Climate Litigation
- Kids Suing Governments About Climate: It's A Global Trend
No comments :
Post a Comment