Australian companies lagging on climate risk disclosure
June 17, 2018
A new report from the Centre for Policy Development has found that while more Australians are considering what the climate change and the Paris Agreement mean for their strategies and investments, serious deficiencies remain in the quality and consistency of climate-related disclosures.
The report, Climate Horizons: Scenarios and Strategies for Managing Climate Risk , was written by Sam Hurley and Kate Mackenzie with input from ClimateWorks Australia, and builds on a 2017 discussion paper which set out five essential principles for high-quality climate risk analysis by Australian firms and investors. The key recommendation of this paper was that companies should conduct scenario analysis to test their resilience in a well-below-2-degree world.
Many scenario exercises to date have used conservative assumptions, overlooked physical impacts of climate change, and failed to disclose impacts on corporate decisions and strategy.
Companies and investors that overlook or misjudge crucial climate impacts and transitions risk major long-term losses and lost opportunities. More rigorous and ambitious scenario analysis can strengthen business plans and support investments and strategies to drive a low-carbon transition.
Climate Horizons offers a resource for those developing and interpreting scenario analysis in the business community. It also provides updated recommendations on next steps that Australia’s financial regulators can take to support better climate-related risk disclosure and management – building on crucial progress since the beginning of 2017.
The report calls for:
New guidance on climate risks by ASIC, the RBA and other regulators to support momentum for better disclosure of climate-related risks by Australian companies and investors.
Close monitoring of climate-related financial disclosures over the next 12 months to assess the case for more demanding mandatory reporting requirements.
A systematic review of sustainable finance in Australia, drawing on an emerging global policy agenda that connects green finance with a wider range of sustainability-related challenges and opportunities.