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.
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|
David Leitch is a regular contributor to Renew Economy. He is principal at ITK, specialising in analysis of electricity, gas and decarbonisation drawn from 33 years experience in stockbroking research & analysis for UBS, JPMorgan and predecessor firms.