Boards have been promising to clean up their act on climate risk for years, but 2020 is shaping up to be a year of reckoning for those yet to take decisive action.
Industry watchdogs, climate change advocates and climate-conscious consumers have been on the warpath this year. And companies that still fail to address climate change in the boardroom have been left with nowhere to hide.
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Action on climate change is on the agenda of an increasing number
of businesses. Nine News |
Addressing climate change in the boardroom has been on the agenda for a growing number of corporate giants.
More than 80 companies have so far ruled out being involved in the increasingly contentious Adani coal project, deeming reputational risk as being too great.
It means they won’t share in the $1 billion in contracts that the project will generate. Adani itself has rebranded its Australian arm as Bravus Mining and Resources.
The big four banks are among those putting their money where their mouth is on climate change. Westpac told media at the time that backing away from the "toxic political debate around coal sends a powerful message that coal is rapidly going out of fashion in the business and finance community".
A turning point emerged this month, when a 25-year-old Brisbane man successfully sued one of Australia’s biggest super funds over its handling of climate change, forcing it to commit to zero-net emissions by 2050.
Australia has the second-highest number of litigation cases related to climate behind the US.
— Zoe Bush, 2019 John Monash Scholar
The case against the $57 billion super fund Rest forced it to join a growing number of pension funds vowing to align investment portfolios to a goal of net-zero emissions by 2050. It marks the first time a superannuation fund has been sued for failing to consider climate change and should serve as a warning to boards.
Cases against companies found guilty of "greenwashing" consumers have also been on the rise.
Climate change litigator and 2019 John Monash Scholar Zoe Bush says: “Unfortunately science tells us that what boards need to do to address climate change should have been done 20 years ago.
“It’s not broadly recognised, but the fact is that Australia has the second-highest number of litigation cases related to climate behind the US,” she says.
“A growing number of boards are acknowledging that climate risk needs to be taken very seriously, with new guidance issued by industry watchdogs forcing companies to closely watch and manage their own climate risk at a board level,” she says.
Companies are shifting their focus away from governance and towards environmental issues in increasing numbers, according to research from boutique asset manager, Perennial Value Management.
Climate change has garnered a great deal of media and shareholder attention in 2020, prompting boards to make it a strategic focus as investor and consumer pressure mounts, Perennial’s Sustainable Future Strategies portfolio manager, Damien Cottier, says.
Clearer pathway neededIts research found that 55 per cent of respondents agree that a national energy policy would provide a clearer pathway for sustainable investment, helping companies to plan and invest in environmental considerations.
“These issues are having a greater impact on share prices, and stakeholders are increasing their expectations. Companies are looking at ways to improve, albeit there is still some way to go,” Cottier says.
Meanwhile, Deloitte this week issued a stark warning for companies in a new report: if climate change goes unchecked, then Australia’s economy will be 6 per cent smaller and have 880,000 fewer jobs by 2070.
Principal report author Pradeep Philip says the costs of climate change continues to rise, along with the costs associated with reducing the risks it presents.
“Climate change is no longer a possibility. It is a reality. Doing nothing is now a policy choice, and it is costly. Both government and private sector investment need to get cracking to accelerate Australia’s inevitable shift to a low emission future. Every day’s delay costs Australians more,” Dr Philip says.
“By 2050 Australia will experience economic losses on par with COVID every single year if we don’t address climate change. That would compromise the economic future of all future generations of Australians,” he says.
Boards yet to act on climate risk can expect some guidance to be released by the Australian Institute of Company Directors, which is working on some new resources on governing climate change risks in the year ahead for members.
The move comes after its recent Director Sentiment Index survey found that directors rate climate change risk as one of the top five issues keeping them awake at night, after COVID-19 impacts, long-term growth and global economic conditions.
CEO Angus Armour says it encourages boards to consider the implications of climate change on their organisations as part of sound risk management and reporting. “Boards have a key role in governing risks related to climate change, as well as considering stakeholder and community expectations.”
Links
- No future in cheap gas-led recovery
- Climate change scientists say it's time to choose the future we want
- Labor's civil war hides Coalition's power failures
- President Biden will send a very different climate wind our way
- Courageous or cut-throat: Adani changes name to Bravus
- Rest Super agrees to align portfolio to climate goals
- Climate crisis will be like a permanent pandemic: Deloitte
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