22/06/2021

(AU SMH) Dangerous Disclosures: Risks Abound With ASX Climate Reporting

Sydney Morning Herald - Sarah Danckert

In January 2020, investment titan and Blackrock boss Larry Fink rocked the corporate world by using his yearly letter to the CEOs of large listed companies to call on groups to disclose their environmental credentials alongside a key global standard.

Many of Australia’s largest companies have spent the past two years improving their disclosure of environmental risks and governance to investors.

The pathway to net zero emissions by 2050 includes no new coal or gas developments from 2021.
This year, Coles Group has committed to deliver net zero emissions by 2050 and Santos has introduced new emissions reduction targets.

Macquarie Group has also joined a group of asset managers working towards “net zero”, though a recent report by The Age and The Sydney Morning Herald questions how the financial behemoth would account for its investments in a wide range of funds exposed to the oil and gas industry.

Against this backdrop, a recent report by top corporate law firm King & Wood Mallesons into the environmental social corporate governance (ESG) disclosure practices of the ASX50 shows the huge steps forward in reporting by large corporates but also highlights the risks for companies delving into this area face.

The law firm, which has one of the biggest corporate advisory businesses in the country, found that 82 per cent of top ASX companies have taken on board the advice of the corporate watchdog and have started to report against a set of recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

Will Heath, King & Wood Mallesons partner Mergers & Acquisitions
But despite this huge effort, there is a “mishmash” of standards – via a blaze of initialisms like TCFD, SASB, CDSB – being applied by Australian companies looking to meeting increasing institutional investor expectation of ESG disclosures.

“It’s a battle of the codes, or a battle of the standards,” says Will Heath, King & Wood Mallesons partner mergers and acquisitions, who praises the companies involved as their reporting has been a voluntary response to investor needs.

“I think all stakeholders would like to see more direction from regulators and governments as to what the reporting standard should be and how they should work.”

Heath says the law firm’s report also tried to unpack some increasingly ubiquitous phrases in the business lexicon, such a “carbon neutral”, “net zero” and “net zero carbon” and what impact the differences in various targets have on company reporting.

‘Tricky things’

“How are you actually going to measure that? Are you talking about CO2? Are you talking about all greenhouse gases? Are you taking into account abatement actions that you do here in Australia or overseas? Are you looking at the impact of the product you’re exporting or just what happens onshore? All those really tricky things start to come into play.

“The policy vacuum here is frustrating, but also really interesting, as to what regulators will do in this area.”

The law firm’s report highlights the variation in company disclosures and stress test scenarios. Some companies are sticking to stress testing their business to 1.5 degree increases in temperatures and others to testing for 2 degrees.

But disclosure and regulation can create significant danger for companies, says Heath.

“As companies disclose more about what they’re doing on ESG, and particularly what they’re doing on climate change, that disclosure opens the companies and their boards and management teams up to potentially more litigation, because most of the litigation we see in a company law context is related to disclosure.
‘People who don’t disclose and get left behind and then are pushed to make disclosure.’
Will Heath, King & Wood Mallesons partner mergers and acquisitions
“And you’re damned if you do and you’re damned if you don’t because as the market gets more disclosures, people who don’t disclose and get left behind and then are pushed to make disclosure.

“And that’s dangerous.”

Heath says that, conversely, disclosing can be dangerous where regulators and governments haven’t put in “guard rails” around what that disclosure should say. This is particularly so when the law generally imposes strict liability for inaccurate disclosure, meaning a company is liable for ensuring its public statements are accurate.

“People can make inadvertent mistakes, which hopefully don’t have consequences and that’s understood as being a learning thing,” he says.

“And on the other hand, some guard rails will help curb greenwashing disclosures where companies are trying to hide practices that aren’t reflective of the company’s best interest, but they’re dressing it up using all these acronyms.”

Heath says this is particularly important once you start looking at below the ASX50 and into the ASX100 and beyond.

“I think in the rest of the market, there are going to be some people who will see opportunities to leverage the grey and the opaqueness,” he says.

“That’s where regulators do have a role to play to set standards and enforce and equally make sure those standards are clear so that people can report against them.”

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(AU SMH) Grim Climate Forecasts Point To Shrivelling Rivers In Northern NSW

Sydney Morning Herald - Peter Hannam

Dams will fill less frequently, farmers will face water cuts and rivers will cease flowing more often in areas across northern NSW as the climate warms and dries, putting at risk communities and wildlife alike.

The grim outlook is contained in a slew of draft regional water strategies for major river systems over the next 20 to 40 years, released by the Planning Department. It said it used “the best available evidence including new climate data and updated modelling”.

An aerial view of the southern Macquarie Marshes during the height of the recent drought. Image was taken in August 2019. Credit: Wolter Peeters

Dubbed “deliberately conservative...to give us an idea of the possible climate risks and allow us to begin planning to mitigate these risks if they arise”, the projections for eight major systems released so far point to shorter periods between droughts and less reliable flows when rivers run.

Under a worst-case scenario, for instance, annual volumes in the Peel River are projected to dive by 47 per cent and those in the rest of the Namoi River, into which it flows, would drop by 44 per cent.

Murray-Darling Basin
‘Irrigation hunger games’: Battle over Australia’s food bowl soon to heat up
One consequence is the Barwon-Darling River, which now gets about one-quarter of its water from the Namoi system, will stop flowing more often. “Under a dry climate change scenario, there could be no end of system flows for 40 per cent of the time,” one of the reports said.

The stark warnings follow renewed alerts this month from the Murray-Darling Basin Authority Authority that flows into the Murray River in the basin’s south had dropped about 40 per cent in the past two decades compared with the average of the century before it.

The state’s findings also raise fresh concerns about the viability of the Berejiklian government’s plan to increase dam capacity or build new ones. For instance, while the government wants to raise the Wyangala Dam wall by 10 metres at a cost that has blown out to as much as $2.1 billion, the regional water strategy for the Lachlan River suggest flows in that system will dwindle.


“The probability of levels in Wyangala Dam decreasing below the critical drought trigger could increase from 7 per cent using the long-term paleoclimate records to 14 per cent using near future climate projections [and] to 43 per cent using long-term climate projections,” the report said.

Wyangala Dam when it all but dried out towards the end of the Millennium Drought in 2009. The NSW government wants to lift the dam wall in a project that may end up being triple the initial estimated cost. Credit: Kate Geraghty
Similarly, total flows along parts of the Gwydir River are forecast to drop by as much as 35 per cent. High flow events, which are important for trigger fish movement and spawning could shrink by a similar proportion.

Water
‘Unacceptable’: Labor joins other MPs to block flood plain harvesting rules
“It is possible for inflows into Copeton Dam [on the Gwydir River] to be half the volume of 27 gigalitres over 24 months” seen during the recent drought, the report said.

Upper House independent MP Justin Field said the reports should prompt the government to rethink its approach to managing rivers.

“Water Minister Melinda Pavey spectacularly fails to provide any meaningful plan for dealing with the impacts of this decrease in water availability, instead offering up the same discredited strategies of more dam building and turning our coastal rivers inland,” Mr Field said.

“These climate realities also raise yet more concerns about the government’s plan to licence billions of litres of water for floodplain harvesting in the northern Murray-Darling Basin,” he said. “Issuing these licences based on historical take when we know that water simply won’t be there in the future is a recipe for disaster.”

A spokeswoman for Ms Pavey said farmers and regional communities were on the frontline of climate extremes.“This is the first time any NSW government has embarked on long-term planning for water security and drought resilience.”

Menindee Lakes in far-western NSW have been filling for the first time in five years. Future climate predictions suggest the Barwon-Darling River which feeds them may cease to flow about 40 per cent of the time. Credit: Wolter Peeters
“The 12 Regional Water Strategies will consider a full range of options to address current and future water challenges, including infrastructure options, water recycling and reuse, and improved water efficiency, to secure water during extreme events and... the toughest droughts,” she said.

Matt Colloff, a former CSIRO scientist now at the Australian National University, said different NSW agencies were producing varying outlooks.

Murray-Darling Basin
The fish and bird species at risk from Australia’s failure to manage wetlands
For instance, another part of the Planning Department predicted in a hydrology report that “across much of NSW, surface runoff is projected to increase in both the near and far future”.

“Largest increases are evident in the central west through to the northern tablelands. Large reductions in surface runoff are projected in both the near and far future for alpine areas in the south of the state,” it said.

Dr Colloff said the new batch of reports “present no data on range, variation or uncertainty, only the worst case scenario”.

”Call me a cynic, but this says to me they are intended to carry a message that ‘we can’t implement the [Murray-Darling] Basin Plan because of climate change,‘” he said. “And ‘because of climate change, irrigators in the Northern Basin should be allowed to continue with floodplain harvesting’.“

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(Scientific American) The Delusion of Infinite Economic Growth

Scientific American - Chirag Dhara | Vandana Singh

Credit: Getty Images

Authors
  • Chirag Dhara is a climate physicist and a research associate at the Indian Institute of Tropical Meteorology.
  • Vandana Singh is a professor of physics at Framingham State University working on transdisciplinary climate pedagogy.
The electric vehicle (EV) has become one of the great modern symbols of a world awakened to the profound challenges of unsustainability and climate change.

So much so that we may well imagine that Deep Thought’s answer today to Life, the Universe and Everything might plausibly be “EV.”

But, as Douglas Adams would surely have asked, if electric vehicles are the answer, what is the question?

Let us imagine the “perfect” EV: solar powered, efficient, reliable and affordable. But is it sustainable? EVs powered by renewable energy may help reduce the carbon footprint of transport.

Yet, the measure of sustainability is not merely the carbon footprint but the material footprint: the aggregate quantity of biomass, metal ores, construction minerals and fossil fuels used during production and consumption of a product.

 The approximate metric tonne weight of an EV constitutes materials such as metals (including rare earths), plastics, glass and rubber. Therefore, a global spike in the demand for EVs would drive an increased demand for each of these materials. 

Every stage of the life cycle of any manufactured product exacts environmental costs: habitat destruction, biodiversity loss and pollution (including carbon emissions) from extraction of raw materials, manufacturing / construction, through to disposal. Thus, it is the increasing global material footprint that is fundamentally the reason for the twin climate and ecological crises.

The global material footprint has grown in lockstep with the exponentially rising global economy (GDP) since the industrial revolution. This is largely because of egregious consumption by the super-affluent in a socioeconomic system founded on growth without limits. Can we resolve this fundamental conflict between the quest for limitless growth and the consequent environmental destruction?

Industrial era exponential rise in the use of primary and derived physical resources:
cropland (a), fossil fuels (b), freshwater (c), metals (d), plastic (e).
a)


b)


c)


d)


e)


ENTER TECHNOLOGY

Technological innovation and efficiency improvements are often cited as pathways to decouple growth in material use from economic growth.

While technology undoubtedly has a crucial role to play in the transition to a sustainable world, it is constrained by fundamental physical principles and pragmatic economic considerations. 

Examples abound. The engine efficiency of airplanes has improved little for decades since they have long been operating close to their theoretical peak efficiency. Likewise, there is a hard limit on the efficiency of photovoltaic cells of about 35 percent because of the physical properties of the semiconductors that constitute them; in practice few exceed 20 percent for economic and pragmatic reasons.

The power generation of large wind farms is limited to about one watt per square meter as a simple yet utterly unavoidable physical consequence of wake effects. The awesome exponential increase in computing power of the past five decades will end by about 2025 since it is physically impossible to make the transistors on the computer chip, already roughly 5 percent of the size of the coronavirus, much smaller.

Whether it is principles of classical, quantum or solid state physics or thermodynamics, each places different but inexorable constraints on technological solutions. Basically, physical principles that have allowed incredible technological leaps over the past century also inevitably limit them.

We might consider that extensive recycling of materials would offset efficiency limits. Recycling is crucial; however, while glass and metals can be recycled almost indefinitely without loss of quality, materials such as paper and plastic can be recycled only a few times before becoming too degraded.

Additionally, recycling itself may be an energy- and materials-intensive process. Even if physical laws could be broken (they cannot) to achieve recycling with 100 percent efficiency, added demand from the imperative for economic growth would necessarily require virgin materials.

The key point is that efficiency is limited by physics, but there is no sufficiency limit on the socioeconomic construct of “demand.”

Unfortunately, the situation is even more dire. Economic growth is required to be exponential; that is, the size of the economy must double in a fixed period. As referenced earlier, this has driven a corresponding increase in the material footprint.

To understand the nature of exponential growth, consider the EV. Suppose that we have enough (easily extractable) lithium for the batteries needed to fuel the EV revolution for another 30 years. Now assume that deep-sea mining provides four times the current amount of these materials.

Are we covered for 120 years? No, because the current 10 percent rate of growth in demand for lithium is equivalent to doubling of demand every seven years, which means we would only have enough for 44 years.

In effect, we would cause untold, perhaps irreversible, devastation of marine ecosystems to buy ourselves a few extra years’ supply of raw materials. 

Exponential growth swiftly, inevitably, swamps anything in finite supply. For a virus, that finite resource is the human population and in the context of the planet it is its physical resources.

The inescapable inference is that it is essentially impossible to decouple material use from economic growth. And this is exactly what has transpired. Wiedmann et al., 2015 did a careful accounting of the material footprint, including those embedded in international trade, for several nations.

In the 1990–2008 period covered by the study, no country achieved a planned, deliberate economywide decoupling for a sustained length of time. Claims by the Global North to the contrary conceal the substantial offshoring of its production, and the associated ecological devastation, to the Global South.

Recent proposals for ecocidal deep-sea and fantastical exoplanetary mining are an unsurprising consequence of a growth paradigm that refuses to recognize these inconvenient truths.

WHAT IS SUSTAINABILITY?

These observations lead us to a natural minimum condition for sustainability: all resource use curves must be simultaneously flatlined and all pollution curves simultaneously extinguished.

It is this resource perspective that allows us to see why EVs may help offset carbon emissions yet remain utterly unsustainable under the limitless growth paradigm. 

Sustainability from a resource perspective: Exponentially rising resource use and pollution (a and b) are unsustainable. We define sustainability as flatlined resource use (c) and extinguished pollution (d). Credit: Aditi Deshpande
THE REAL QUESTION

We have argued that the inextricable link between material consumption and GDP makes the infinite-growth paradigm incompatible with sustaining ecological integrity.

Thus, while EVs constitute a partial answer to the climate question, within the current paradigm they will only exacerbate the larger anthropogenic crises connected to unsustainable resource consumption. 

The real question is this: how do we transition to alternative economic paradigms founded on the reconciliation of equitable human well-being with ecological integrity? 

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