Investors have been urged to “step up the pressure” on companies to act on climate change as annual meeting season approaches, with a report arguing corporate Australia is paying lip-service to the issue.
Environmental non-profit Market Forces says many of Australia’s 100 biggest listed companies are continuing to take a "superficial" approach to disclosure and action on climate change and emissions, despite warnings by regulators and lawyers of potential business and legal risks.
Market Forces research, to be released on Tuesday, suggests that of 74 ASX100 companies in sectors dubbed “high risk” for climate change impacts - as defined last year by a G20-led task force on climate risk disclosure - only 55 per cent identified climate change as a material business risk, and more than 80 per cent did not have a plan to reduce their own emissions.
Almost 40 per cent of ASX100 companies studied had increased their emissions over the past year, the Market Forces research said.
The NGO - which is affiliated with Friends of the Earth - has urged investors to “escalate” climate change as an issue in their discussions with companies, and divest shaes in companies that are “unable or unwilling” to align with the goals of the 2015 Paris climate agreement.
“There is a growing recognition of climate risk, but few companies are actually undertaking the hard yards to fully address the issue,” Market Forces analyst Will van de Pol said.
The Market Forces research comes as the new Morrison government grapples with internal divisions on its approach to climate change, emissions and the Paris agreement. New Defence Minister Marise Payne is attending the Pacific Islands Forum this week where climate change is expected to be a major topic of discussion.
It also comes as regulators consider how climate change may impact the financial system, with the Australian Securities and Investments Commission (ASIC) assessing how ASX300 companies disclose climate change risks, and the Council of Financial Regulators - which includes ASIC, the Australian Prudential Regulation Authority (APRA), the Reserve Bank and federal Treasury - creating a working group on the issue.
ASIC has said company directors should take seriously warnings that they risk future legal action if they fail to consider risks related to climate change.
A third of companies studied “explicitly encourage” emissions reductions through their executive or director bonus schemes, Market Forces said, a number that had doubled since Market Forces’ last examined the issue in March.
But just three companies – South32, AGL and Stockland – had started reporting climate risks in line with the so-called "TCFD" rules nailed down by the G20's task force last year, which have been endorsed by major companies and investors.
Another four companies - Commonwealth Bank, BHP, Westpac and ANZ - “came close” to fully adopting the TCFD recommendations, Market Forces said, while others had promised to do so for their 2019 reporting.
The TCFD recommendations are anchored on the Paris agreement's pledge to keep global warming to well below 2 degrees. In July, the Australian Securities Exchange's corporate governance council - in proposed new guidelines - said companies should boost their disclosure of climate change risk, including reporting with the TCFD rules if they had "material exposure".
The Market Forces research found that while 65 per cent of companies studied unequivocally accepted climate science, 27 per cent were unclear in their language and 8 per cent had not formally acknowledged the science of climate change.
In June, research from the Australian Council of Superannuation Investors found that 22 ASX200 companies had adopted or promised to adopt the TCFD rules while 10 more were "reviewing" them.
Mr van de Pol pointed to South32 as a company that was "getting it right, coupling detailed climate risk disclosures with action to reduce exposure".
But he questioned why ASX Ltd was not following the suggestions of its own corporate governance council in not disclosing detailed climate risk information, saying the listed company was exposed to climate risk because "high risk-exposed mining, materials and big financial companies dominate the ASX".
ASX Ltd said it was "difficult to conclude" the company had a material exposure to listed companies directly at risk to climate change, given ASX Ltd was a "diverse, service-based organisation". The technology sector was its fastest growing sector, it said.
It would comply with the corporate governance council's recommendations on an "if not why not" basis once they were finalised, ASX Ltd said.
Whitehaven Coal was among the lowest-scoring companies in the Market Forces research, which found that the coal miner - a vocal proponent of "High Energy Low Emission" (HELE) coal fired-power stations - had not disclosed any risks it may face from climate change or listed it as a material business risk.
Market Forces has launched shareholder resolutions against Whitehaven Coal ahead of its AGM in October, calling on the company to ensure its strategy was “consistent” with the Paris agreement. The vote would be a "litmus test" on investors' willingness to push companies on climate, Market Forces said.
Whitehaven has said it will recommend shareholders vote against the resolutions. "We are not going to pre-empt the proceedings of the AGM," a Whitehaven spokesman said when asked for comment. "We will recommend shareholders not support resolutions requisitioned by shareholders representing 0.0016 per cent of the company’s shares on issue for the sole purpose of supporting Market Forces’ ongoing anti fossil fuels campaign."
It did not comment on Market Forces' research.
In the past two years, Market Forces has coordinated a series of shareholder resolutions pushing companies including QBE, Santos and Oil Search to disclose more about climate risks. None of the resolutions have been successful, but they have won the backing of some major investors, with the QBE resolution in May attracting more than 18 per cent support.
The step up in the number of such agenda items, from Market Forces and others, has met with frustration from some boards and the body representing investor relations professionals, partly due to the time and resources they say it takes for companies to deal with them. Companies targeted have urged shareholders not to vote for them.