By Robin Hamaker-Taylor
The Australian Council of Superannuation Investors (ASCI) published a report on the status of climate reporting among ASX200 companies* in late September 2020. The ASCI is comprised of 37 Australian and international asset owners and institutional investors who collectively own around 10 per cent of every ASX200 company. To develop a picture of how these corporates are taking climate action and disclosing, the ASCI analysed all publicly available documents produced by ASX200 entities (as of 31 March 2020). This includes Annual Reports, Sustainability Reports, standalone TCFD Reports, company websites and ASX announcements.
The report indicates that there has been a surge in disclosure against the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. In 2017, just 11 companies disclosing against the TCFD framework, which has grown to 60 ASX200 companies by 2019. A further 14 companies have also committed to disclose against the recommendations.
The research also shows that there has been an increase in the action on climate transition risks. For example, there has been increased adoption of net-zero emissions commitments, as net-zero commitments have emerged as the latest strategic front in managing climate change exposures, according to the ASCI. The research also shows that science-based targets are gaining traction.
While the report generally showcases increased action in relation to transition climate risks, it also flags how firms are taking action in relation to physical climate risk. ASX200 companies are starting to disclose physical climate risks in a meaningful way, though at present just 10 firms were identified in this category, including a variety of corporates, ranging from commercial banks to natural resources and oil & gas companies. ASCI’s research shows that physical risk analysis and disclosure is still in early stages. As it stands, quantification of the financial impacts of physical climate risks and necessary capital expenditures for climate adaptation are not yet disclosed by ASX200 companies.
Corporates in Australia and beyond can look to this report to understand how large corporates are taking climate action and disclosing that. The report rightfully points out that investors and other stakeholders need companies to begin to quantify the potential financial impacts of physical climate risk or the cost of capital expenditure to build resilience. Whilst the TCFD recommendations provided a framework for disclosing transition and physical climate risks and opportunities, they left organisations to develop their own methodologies and approaches for implementing the disclosure recommendations. Acclimatise, along with the European Bank for Reconstruction and Development (EBRD), the Global Centre on Adaptation (GCA), a range of partners from the financial, corporate and regulatory sector as well as consultancy firm Four Twenty Seven, developed a set of recommendations on how institutions can include physical climate risks and opportunities into their financial and corporate reporting. This is available on the EBRD’s physical climate risk knowledge hub, accessible by clicking here.
The full ASCI report is available by clicking here.
* The ASX200 is a stock market index listed on the Australian Securities Exchange. It is based on the 200 largest ASX listed stocks, which together account for around 80% of Australia’s sharemarket capitalisation, according to ASX200 List, 2020.