'Out Of Line': Top Australian Companies Accused Of Undermining Paris Deal

The Guardian - Ben Smee

Action group Market Forces urges shareholders to divest holdings in 22 ‘uninvestables’

The companies reported to be ignoring the Paris climate deal are worth a combined $121bn and represent 7% of the ASX300 index. Photograph: Tim Wimborne/Reuters 

New analysis shows 22 of Australia’s largest companies are actively working to undermine the Paris agreement targets, betting shareholders’ money on strategies that assume global climate change action fails.
Investor action group Market Forces says those companies – worth a combined $121bn and representing 7% of the ASX300 – are “out of line and out of time” and has called on shareholders to divest their holdings.

Paris-alignment of ASX 300 companies by weight

The group’s legal analyst, Will van de Pol, said it was the first time Market Forces had “named names” and called out companies whose business strategies relied on the world failing to meet the Paris targets to restrict the global temperature rise to 1.5C above pre-industrial levels.
“A handful of Australian companies are undermining efforts to limit global warming by pursuing new fossil fuel projects, or basing their business plans on energy projection scenarios that would doom the Paris agreement to failure,” the report says.
“These companies have now been given more than three years to align their business with the Paris goals, but have dismissed the notion.”
The list of “uninvestables” includes mainly resource and energy companies, but also diversified investment vehicles including WH Soul Pattinson and Seven Group Holdings.

The Market Forces study found that 199 ASX300 companies, representing 64% of total market capitalisation, faced heightened transitional climate risk but had not yet demonstrated business strategies consistent with the Paris agreement.
There were 143 companies with policies “not overtly inconsistent with Paris”, and just eight had aligned their strategy with the agreement.
Three companies – AGL, Origin and BHP – earned a reprieve from the list of the worst offenders, despite acting in a similar manner, because Market Forces said they had shown some progress towards aligning their goals with Paris.
In recent years, the boardroom has become an increasingly important front for climate activism.
This month, Norway’s sovereign wealth fund, the largest in the world, announced it would divest from firms that explored for oil and gas. Last month, Glencore said it would no longer back new coalmines in response to investor calls for the company to act on climate change.
Pressure is also increasing on Australian companies, though many still refuse to even consider the financial risk posed to their businesses by climate change.
In September, a report from the Australian Securities and Investments Commission said “the law requires” relevant companies to “include a discussion of climate risk” in their annual report.
In February, the Asic corporate governance council released new recommendations that directors and companies should make climate risk disclosures.
The Market Forces report singled out “coal cowboys” Whitehaven and New Hope, which it said had plans to establish new coalmines, or expand existing ones, based on forecasts that assume the failure of Paris.
Oil and gas companies Woodside, Santos and Oil Search had each “faced increased investor engagement over climate change in recent years, but this has done nothing to dissuade their plans to increase fossil fuel production”, the report said.
“Investors determined to play their part in the fight against runaway climate change must immediately reallocate capital away from these companies.”

Links

• Out of line, out of time (pdf)
• Australian companies still failing to properly disclose climate risk
• Australian mining giants 'may be breaking law' by ignoring climate change risks
• Australia's coal bonanza at risk as Chinese import 'ban' spreads
• Authorities can do nothing about pro-coal ads linked to Glencore campaign
• Coalition considers letting power companies buy offsets to cut emissions
• Queensland accused of breaking ‘no public funds for Adani’ promise
• Coal-fired plant shifted $1bn offshore while pocketing $117m from Australian taxpayers
• Coal in decline: Adani in question and Australia out of step
• Big Australian banks invest $7bn more in fossil fuels than renewables, says report

Australian Faces Free Trade Agreement Pressure To Cut Emissions

AFR - Ben Potter

Australia is set to come under increased pressure on climate change this year after French officials insisted the Morrison government's carbon emissions targets are not ambitious enough to fully comply with the Paris agreement.
The French officials' comments come at a sensitive time because Australia is currently negotiating a free trade agreement with the European Union, which EU negotiator Helena Konig and French President Emanuel Macron have said must include a clause requiring full implementation of the Paris agreement.

In a briefing in Paris the officials lavished praise on the role of Pacific Islands nations and New Zealand in climate change negotiations while slighting Australia's efforts with faint praise, and held out the hope of a stiffening of Australia's ambitions after the federal election.

Coal is expected to be Australia's largest export this year. Caria Gottgens

"New Zealand is playing a very constructive role in the fight against climate change. Australia is, well, it's slightly more complicated," an official said.
"Australia is as constructive as it can [be] in the climate change negotiations but frankly not ambitious enough in terms of its NDCs and ambitions. Hopefully it can become more ambitious over time."
NDCs – nationally determined contributions – are the commitments made by individual nations at the Paris talks.
In an apparent reference to the federal election expected to be held by May 18, for which Labor is campaigning on more ambitious carbon targets and leading in opinion polling, a second official said, "We know that things may happen in Australia this year, and we hope of course that the ambition of Australia will increase over time".

Europe's frustration
The remarks underline Europe's frustration with backsliding by countries such as the United States, which wants to pull out of the Paris agreement, Brazil, which is toying with pulling out, and Australia and other nations that claim the energy intensive nature of their economies entitles them to deliver smaller emissions cuts.
The Morrison government has stuck with the carbon targets agreed to at the Paris talks in 2015, which require Australia to reduce its carbon emissions by 26-28 per cent from 2005 levels by 2030. The target would be reduced to about 15 per cent if the government insisted on being able to carry forward the "overachievement" against past "Kyoto" targets, a tactic comparable nations have ruled out.

Public pressure is also increasing for more decisive action on climate change: The School Strike for action against Climate Change. Justin McManus

Australia's climate change negotiators must also return to the United Nations in New York in September to finalise the "rule book" for international carbon markets, which couldn't be agreed at the COPS24 talks in Katowice, Poland, last December despite pressure building for signatories to pursue policies that would limit global warming to 1.5 degrees above pre-industrial temperatures.

Cut more carbon
Australia is expected to come up with new, improved emissions targets by 2020 under the Paris agreement, which contains an overriding agreement – beyond the individual nations' targets – to limit temperature increases to "well below" 2 degrees.
The French officials agreed with scientists who say existing commitments would mean global temperature increases of more than 3 degrees. But they were not ready to embrace a new target of 55 per cent emissions cuts recommended by an EU committee two weeks ago, which several European nations have pushed back against.
Scientists say temperature increases of 3 degrees and more would be more dangerous, with increased extreme weather events that insurers say could make insurance unaffordable.
Last September the Intergovernmental Panel on Climate Change issued a scientific report that concluded coal power would have to be virtually eliminated and agriculture changed dramatically to achieve the 1.5 degree target and avoid more frequent dangerous heatwaves, droughts, floods and tropical cyclones as well as irreversible damage to coral reefs such as the Great Barrier Reef.
Coal is expected to be Australia's largest export this year, with sales of $67 billion across thermal and steel-making coal.
The French officials laid out a series of priorities for climate negotiations including getting the Paris agreement "fully implemented", raising national ambitions for carbon cuts and getting more ambitious commitments from the signatories by 2020.

No coal, no 'double counting'
They said the Group of 20 leading economies – which includes Australia, the US, Japan and Britain as well as France, German, other leading European nations and emerging giants India and China – must take the lead in cutting emissions because they are responsible for four-fifths of global emissions.
France has banned its development aid agencies from financing coal power, and the officials said they wanted the equivalent agencies of China and Japan - the largest funders of global coal power projects - to follow suit and support renewable energy instead, because of the benefits in terms of reduced carbon emissions and improved health outcomes that would likely result.
They noted that Australian officials played a constructive role in technical aspects of climate talks – such as rules for carbon markets and actions to mitigate damage to coral reefs.
But they said they were counting on a strong rule book on carbon markets to emerge from the UN talks in September to prevent any "double counting" – such as the tactic of carrying forward past overachievement – and maintain the integrity of the Paris agreement.
"That's what we mean by environmental integrity – real reductions in emissions, no double counting," an official said.

Links

• Coal power finished by 2050 if temperature increase kept to 1.5 degrees: IPCC
• Even In Its Dying Days, The Government Denies The Need For Climate Action
• Enough Scandalous Time-Wasting On Climate Change. Let's Get Back To The Facts
• Scientists Slap Down Australia Government Over Fake Climate Claims
• The Coal, Hard Facts: Australia Could Follow Germany's Phase-Out Model
• Angus Taylor Again Falsely Claims Australia's Greenhouse Emissions Are Falling
• Climate Change In Court

Why Climate Change Risks Are 'Material' For Big Finance

Fairfax - Clancy Yeates

After a prod from Treasurer Josh Frydenberg, the financial regulator this month reminded superannuation funds that their job was to stay out of political causes, and stick to their knitting: looking after members' interests.
Then, the day after this warning was revealed, the very same regulator, the Australian Prudential Regulation Authority (APRA), upped the pressure on our biggest financial institutions to take more action to deal with climate change risks.

Do those two directions from APRA sound like they might be in conflict? They shouldn't.

Financial businesses are under greater pressure to consider their exposure to climate change risks, which could include fossil fuel assets. Credit: Peter Braig

The pressure put on companies over climate action by many large superannuation funds has attracted plenty of attention lately, with some criticising super funds' role in pushing resources giant Glencore's to cap its coal output.
How the funds managing $2.7 trillion in retirement savings deal with social or environment issues is a debate that is worth having, as the clout of super funds will only grow in years to come. When it comes to climate change, however, the message coming from those who regulate our financial system could hardly be clearer.

They view climate change as a real and present business risk that financiers need to be putting high on the agenda – irrespective of the failure of our political system to really deal with the issue. The sooner more companies start viewing it this way, the better.

In the Reserve Bank’s first meaty comments on the topic, deputy governor Guy Debelle this month warned climate change could cause financial shocks, if companies didn't take these risks seriously in their planning.

Then, last week, APRA released its first survey of how 38 large banks, insurance companies, and superannuation funds are looking at climate risks.
It showed a third of these businesses viewed climate changes as a "material" risk to their businesses right now. More than half thought it would be a material risk at some point in the future.

The most common types of financial risks identified were damage to reputation, flood, regulatory action, cyclone, energy risks, and bushfires.
In a finding that's raised some eyebrows among observers, only about half of the general insurers — who are exposed to flood, bushfire, and cyclones — thought climate change was "material" for them at the moment.

More than 40 per cent of banks and superannuation funds also thought climate risks were material right now, and the vast majority thought they would be material risks in the future.

It's a safe bet those proportions will only rise in years to come, as regulators and investors raise the pressure on financial businesses to put more emphasis on climate change risks.
Emma Herd, who represents institutional investors with about $2 trillion as chief executive of the Investor Group on Climate Change, says the consistent message from regulators is that climate change risks are "material, foreseeable, and actionable."

“The key message for the businesses is don’t get distracted by the political debate. Look at what your regulators are telling you," she says.
Why are the regulators so concerned to see action on climate change?

No doubt part of it is a sense of trying to do their part to help us avoid catastrophic environmental costs for future generations, but their more immediate worries concern financial stability.

APRA board member Geoff Summerhayes, speaking in his capacity as chair of the Sustainable Insurance Forum, last month said climate change was quickly moving from a "purely partisan or moral issue" to one that is "distinctly financial in nature."
Insurance companies are the most immediately affected by more frequent and severe natural disasters. Global insured losses in 2018 were only half of those of 2017, Sumerhayes said, but he added that "2018 was still the fourth most costly year on record".

Banks and financial markets would also be exposed to dramatic changes in the values of trillions in fossil fuel assets. There is a risk many of these assets could become "stranded" as a result of policies to mitigate carbon dioxide emissions, or from advances in renewable energy technology. That risk is especially relevant to big fossil fuel producers like Australia, and it's a reason why banks have been getting more wary about coal financing in recent years.
Longer term, banks' massive mortgage books could also be exposed to risks because of hazards made worse from climate change, such as floods or cyclones.

For several years, regulators have been pushing big financial institutions to collect and publish more data on such climate risks, and run scenarios on how they would fare under various "transition" scenarios.

Now, APRA says it wants to see a move from "awareness to action." It wants banks, insurers and wealth managers to look at climate risks just like any other part of their risk management framework — not as a social responsibility issue.
Bank of England governor Mark Carney, a global leader in this area, last week gave us a taste of where APRA and other local regulators will probably go. Carney said he expected climate risks to be given consideration at board level, and that the United Kingdom regulators would start conducting climate "stress tests" on insurers and banks.

Carney acknowledged these sorts of changes - which are likely coming here as well - won't be enough on their own to move the world to a low-carbon economy. That will be up to governments, and business.
But however dysfunctional our domestic debate is on climate change, it's abundantly clear the financial sector needs to give this issue growing attention.

Links

• Banks need to mitigate climate risk: APRA
• APRA to banks, insurers: Act on climate risk
• Fin services needs to walk the walk on climate risk
• 'Change Now Or Pay Later': RBA's Stark Warning On Climate Change
• Climate Change Poses Financial Stability Risk – RBA
• Climate change-related litigation was once seen as a joke, but it could soon become business reality

AustralianSuper targets dirty dozen in Climate Action 100+ push