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ASX top 20 companies for climate change reporting in 2017

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Climate change reporting requirements are increasing

In a note published  November 3 we looked at the Financial Stability Board’s recommendations on climate related financial disclosures.

We noted that the Financial Stability Board has many of the world’s Reserve Banks as members, as well as the IMF, and could be regarded as providing significant credibility to climate reporting by the corporate sector – and perhaps as providing momentum on the need for an Accounting Standard that would cover climate risk.

What companies actually disclosed this year

Is QBE the worst?

In this note we briefly looked at the top 20 companies by market capitalization listed on the ASX to see what they actually said in their latest annual report. Mostly this is 2017 but in some cases its still 2016.

We rated each company out of 5 on disclosure.  This was a qualitative score awarded by my co researcher on this program, Bella Leitch, a student at Macquarie University.

However, I reduced QBE’s score. For an insurance company that also does reinsurance not to mention climate change seems poor.

Your analyst works to the view that companies that do a thorough job on sustainability (which has many dimensions, not just climate change) will tend to be survive for longer. An unenlightened view will eventually lead to investors penalizing the rating.

At this stage we are just interested to monitor what companies are actually saying this year.

Research method

At each company’s website we  searched the following documents: annual review for 2016/17, sustainability reports (for the companies that had them) and also general announcements.

We then searched the documents for these following words: climate, carbon, warming, environment and sustainability. The text was then summarized.

S&P/ASX 20 Index (1 November 2017)    
Company Mkt  cap A$bn ITK summary of company statements What they actually say Score (1-5)
Commonwealth Bank of Australia 136 Mention as a 2017 highlight the 2.8bn lent to renewable energy projects. Mention “environmental stewardship” – say they are in line with the Paris agreement as well as enacting additional sustainable and ethical investment options. They have a Sustainable Property Strategy to monitor their direct carbon emissions and energy use. They understand that climate change is a large risk both financially and non-financially for the bank. By taking additional contribution above their core businesses they hope to have positive influences on their customer relationships  as their customers change their preferences and behaviours. 5
Westpac Banking Corporation 113 Limited discussion. Released refresehed climate change policy this year.  Mention climate change only within their sustainability leadership section. Issued a climate change position statement nd 2020 action plan. Say they have competitive advantage in their sustainability culture. Within their strategic priorities for sustainability, environmental solutions are briefly discussed including a short statement of their commited exposure to environmental and clean tech industry and a revised climate change policy. 2
Australia And New Zealand Banking Group Limited 88 One of their key highlights of 2017 is reducing greenhouse gas emissions by 20% on premises from 2013. They mention $6.9bn funded and facillitated in low carbon and sustainble solutions since 2015. Mention how their stakeholders value responsible business loans in areas such as climate change and encouraging its limited impact. Discuss how the environent and climate change is a major trend that is shaping society. Their  reporting reflects the Financial Stability BoardÕs (FSB) Task Force on Climate-Related Disclosures (TCFD) recommendations, which is also discussed by the CEO. They understand that climate change is a large risk both financially and non-financially for the bank. They have begun to take many steps to accommodate and finance the movement to a low carbon economy. 5
National Australia Bank Limited 88 Climage change is first mentioned in the environmental, social and governemtn (ESG) risk management section. They have an environmental financing comintemnt of $55bn by 2025 in order to help address climate change and transition to a low carbon economy. They recognise that climate change is a significant risk. They recognise the risk that is climate change and have implemented various strategies to address this issue. In order to understand the implications of the Paris agreement and refresh climate change policy,they have created a Climate Change Working Group .. However it is not mentioned as a key highlight for NAB 3
BHP Billiton Limited 87 Discuss climate change management as a key goal – it is treated as a board level governanace issue. Their greenhouse gas emissions were reduced by 21% from 2006. Climate change is core to their strategic decision making. Large discussion on the risks of climate change in their fossil fuel products and the growth of renewable energy. Also discuss the physical impacts of climate cahnge e.g. such as changes in rianfall patterns on the collection of their products.  Include an entire section of the annual report on climate change and their response to it. Climate change is going to have a major impact on their industry both physically and non-physically. As such they are trying to reduce their own carbon footprint and improve their image in order to compete with the rise in renewable enegry and limit the impact of negatie press on fossil fuels. 5
CSL Limited 63 Very limited discussion. They say they meet Australian relgulations in regard to the Govenrment’s greenhouse reporting act. Environmental and climate cahnge risks are monnitored to ensure compliance with regulatory requirements. As environmental impact is of special importance to select investors so CSL comits to initiative such as CDP CSL has met its reporting obligations under the Australian GovernmentÕs National Greenhouse and Energy Reporting Act (2007) 1
Wesfarmers Limited 48 Limited discussion. When discussing their sustainability operating, they briefly mention an aim to reduce their impact on climate change. It is noted as a risk for the future. They have a climate change resilience aim – which has enacted a climate change strategy including two degree scenario analysis and carbon shadow pricing. There is an evaluation of the risk of climate change, however it is not one of their key goals. They aim to keep up with national standards and are planning accordingly for the changes predicted with climate change. 2.5
Telstra Corporation Limited 42 Mention it as a goal as apart of their sustainable future. 68% reduction greenhouse gases from baseline year. They recognise climate change as a global challenge and it is one of their goals to combat this. They will use technology to address their environmental challenges e.g. Telstra’s cloud calculator tool . There is recognition of the impact climate change will have and a demonstrated aim to reduce their and their customers level of greenhouse gas emissions. However there are many other goals and aims that appear to take a more centre stage at the moment for Telstra. 2
Woolworths Limited 34 Very limited discussion. Mention an increase in use of solar energy. Climate change is mentioned as a part of a strategic risk and they discuss very briefly how they have CRS to improve sustainability. They recognise climate change as a generic risk that could  adversely affect the group’s performance. 1
Macquarie Group Limited 33 There is limited discussion regarding climate change. They talk of continued  commitment to low-carbon growth sectors under the ESG highlights. They also include climate change in their risk analysis. They continue to plan and strategise regarding the impacts of climate change however, there is very limited discussion and it is not one of their key priorities. 1.5
RIO Tinto Limited 30 *This comes from 2016 annual report – 2017 annual report not released yet. Published their first climate change report in 2016.  7% reduction in GHG from 2015 to 2016 – this is indicative of their ability to respond to future legislative costs and climate policies. Recognise both physical and non-physical risks of climate change.  Mention ability to respond to climate change as a goal of 2017. In 2016, Shareholders passed a resolution to report on climate change. Limited discussion. They understand that climate change will be a risk to them in the future and are beginning to report and account for this risk, but as of the present there are larger issues for them. 1.5
Woodside Petroleum Limited 26 *This comes from 2016 annual report – 2017 annual report not released yet. Climate change was recognised at the top material rick to Woodside. Developed a climate change and carbon strategy in 2016. Recognition of it as a risk and are developing strategies to deal with it in the future, however are only just beginning to deal with it. 1
Transurban Group Stapled 25 There is no mention of climate change. Closest mention is that one of the directors is also on the board of the climate change council and that they are trying to reduce environmental footprint with the develop of new roads/tunnels N/A 0
Scentre Group Stapled 21 *This comes from 2016 annual report – 2017 annual report not released yet. No mention of climate change or global warming. Brief discussion of decrease in GHG in separate sustainability report N/A 0.5
Suncorp Group Limited 18 11% reduction in greenhouse gas emissions. Climate change is discussed as a key external risk. Comply with the National Greenhouse and Energy Reporting Act 2007 Recognition of it as a risk and are developing strategies to deal with it in the future, however it is not a key focus area. 1.5
Westfield Corporation Stapled 16 Very brief mention of climate change as a potential risk. Further brief discussion in separate sustainability report Recognise it as a future risk. 1
Insurance Australia Group Limited 16 The Group’s sustainability performance is managed within this framework and supported by a number of policies and position statements including IAGÕs Social & Environmental Policy and Public Policy Position on Climate Change. Establish the future risk of Climate change to property and its impact financially for insurance companies. They have developed a climate change policy in order to deal with policies regarding the reporting and risks of climate change. 1
Brambles Limited 15 Very briefly discuss a reduction in carbon emissions through their production process. Further brief mentions in sustainability report. They are trying to reduce carbon emissions through their production process 1
QBE Insurance Group Limited 15 Zero mention in the annual report. Brief mention of climate change awareness and risk assessment in sustainability report. Acknowledge that climate change is real and a potential risk but not a major issue for them 0
AMP Limited 15 Very limited discussion. Only mention is of their aim to be environmentally conscious and that they have been carbon neutral since 2013. Not a large issue for them, aside from the fact that they have been carbon neutral since 2013. 0.5

  

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  • Hettie

    Extraordinary that insurance groups, which are exposed to significant risks from the property damage that extreme weather events cause, should not be paying serious attention to climate change.
    Shakes head in bewilderment.

  • Kevan Daly

    David,
    I have shares in every one of the companies you mention and if their AGM is on in Sydney I attend.

    My view is that most of them couldn’t give a stuff about climate change. They simply do what they were going to do anyway and interpret it in terms of care for the environment. Climate is simply a box ticking exercise when it comes to their Annual Report or Sustainability Report which they usually outsource anyway.

    The 4 exceptions I’d make are RIO and BHP because there is sovereign risk to them in terms of carbon taxes. The other 2 are AMP and IAG who I think really are true believers when it comes to AGW. Interestingly you rate them poorly.

    As for your comments on insurance companies I’d make two points:
    (1) the frequency of extreme weather events isn’t increasing – even the IPCC’s AR5 said that
    (2) the insurance claims from extreme events are increasing because more insurance is taken out and more valuable assets are available for damage – so insurance simply increase premiums and blame climate change.

    • David leitch

      The frequency of storms may not increase but their severity will. More energy in the air and in the water. Flood risk, not always iinsureable, also increases. Bushfire risk goes up.

  • DugS

    Great expose, well done David and Bella. This kind of calling out and naming and shaming of our big corporate entities is very effective in proding them into effective action as opposed to making bland inane mission statements that achieve nothing.
    This report needs to be sent far and wide to get as much exposure as possible and in so doing become a burr under the saddle to those companies so that they have to take notice and do something. There must be no doubt that climate change is going to have enormous impact on our lives but if we are collectively galvanized into action then the worst may yet be avoided. The big end of town must know this and must take the lead as they are not immune. They have the resources and the reach to play an important role in turning the Titanic of apathetic indifference around and towards determined collective action. Thanks for the timely and thoughtful presentation.

  • MaxG

    One has to understand what the annual reports are there for: to look as good as possible from a financial performance perspective. Unless there is a real and publicly known issue, the report will be shiny and cover their rear.

    I just quit working for an organisation which was pulled up by the ombudsman for not being able to report on X. They used a totally disjointed approach, where each business unit was doing their own thing, with respect to X and related data (which is supposed to be highly protected, but) being recorded in e-mail, spreadsheets, word docs on unsecured drives, etc. A sensible document would state something like the above, however, they chose to say: in order to comply with legal requirements we ill do/invest in X.
    Remember: smoking is neither addictive nor does it negatively impact your health. This was a sworn statement in front of a court, made by tobacco company’s CEOs; Does anyone really expect to read any truth coming out of corporate reporting? … other than serving their own shareholder (greed) driven objectives.