Market Forces’ latest research has revealed that just 7 companies in the ASX50 (14%) have disclosed scenario analyses in line with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Worryingly, 31 companies (62%) have not mentioned the TCFD recommendations at all, despite 23 of these companies operating in sectors that the TCFD identifies as most exposed to the potential financial impacts of climate change.
The findings show that investor engagement is currently failing to procure robust climate risk reporting from many major Australian companies. Investors, like our super funds, must engage more forcefully with companies to ensure they improve disclosure and set targets to reduce emissions. Companies that fail to comply should be subject to punitive action such as voting against remuneration, replacing directors, or divestment.
What is the TCFD?
The TCFD is an offshoot of the Financial Stability Board, a international regulatory body set up in the wake of the 2007-8 global financial crisis. In December 2016, the TCFD published draft recommendations for companies to measure climate-related risks and opportunities and communicate them to investors. The final recommendations, released in July 2017, were promptly adopted by the G20, endorsing the TCFD recommendations as a robust climate risk disclosure model.
Source: TCFD
Various Australian entities – including ANZ, BHP Billiton, Cbus and Westpac – expressed support for the TCFD recommendations immediately after they were published. The Investor Group on Climate Change (IGCC) called for adoption of the recommendations immediately after they were published, while ACSI publicly called for ASX200 companies to adopt the TCFD in September.
With the final recommendations published prior to the latest Australian corporate reporting cycle, Market Forces has reviewed ASX50* companies’ public disclosures to determine how those companies have responded to the TCFD recommendations. The Annual Reports, Sustainability or Corporate Responsibility Reports, CDP submissions and websites of all ASX50 companies were reviewed for: The material risks identified; Climate change and climate risk disclosure; Scenario analyses (where available); Scores allocated by CDP on climate change submissions.
*The ASX50 are the top 50 companies listed on the Australian Stock Exchange, by market capitalisation.
Click here to jump to the full table of results.
Along with financial companies (banks, insurers, asset managers and asset owners), TCFD provides supplementary disclosure guidance to the following industries, as they have the “highest likelihood of climate-related financial implications”:
Source: TCFD
Major Findings
- Just 7 companies (14%) have disclosed scenario analyses (pending ANZ on 8 Dec);
- Just 12 companies (24%) have made specific commitments to review or implement the TCFD recommendations in 2017/18, including scenario analyses;
- 31 companies (62%) have not mentioned the TCFD recommendations at all, despite 23 of these companies operating in sectors that the TCFD identifies as most vulnerable to climate risk;
- Less than half of the companies (24 or 48%) explicitly identify climate change as a material business risk (in an audited annual report, rather than in a sustainability report).
Supplementary Findings
- 9 of the 31 companies that have yet to commit to implementing the TCFD recommendations received A or B ratings from the CDP, so improved disclosure should not be a stretch;
- 8 of the 31 companies that have yet to commit to implementing the TCFD recommendations did not submit to or were not scored by CDP on climate change in 2017, which suggests a significant deficiency in transparency and/or competency;
- Of the 26 companies that do not identify climate change as a material business risk, 18 operate in sectors that the TCFD identifies as those most susceptible to climate risk.
- Given that only 75 companies (38%) in the ASX200 made a climate change submission to the CDP, it’s fairly safe to assume that companies outside the ASX50 or the ASX100 will be less equipped to deliver TCFD-compliant reporting;
- Of the 75 companies (38%) in the ASX200 that submitted a CDP climate survey in 2017; only 10 companies (5%) received a leadership score of ‘A’ or ‘A-’, and 15 companies (7.5%) received a ‘B’ score; 50 companies (25%) received a ‘C’ or ‘D’ score.
Wesfarmers Chairman, Michael Chaney, 16 November 2017:
Company-specific Findings
- Stockland has not commented publicly on the TCFD recommendations, but its existing disclosure is arguably TCFD-compliant, as it includes assessments of properties for climate resilience;
- Telstra’s CDP ‘A-’ rating suggests that good climate risk disclosure is not limited to those sectors most susceptible to climate risk;
- Of the three major general insurers, only Suncorp identifies climate change as a material business risk;
- IAG does not identify climate change as a material business risk in its Annual Report, but as a “material issue” in its Sustainability Report, despite underestimating claims from natural disasters in nine years out of the last ten;
- QBE does not identify climate change as a material business risk in its Annual Report, but rather as an “emerging” risk, despite suffering a profit downgrade following the Atlantic hurricane season;
- Woolworths suggests climate change as an example of “generic risks that apply to most businesses and Australian households”, rather than as an explicit material business risk;
- Despite the attention the TCFD recommendations have received, climate risk disclosure is by no means new, four companies disclosed scenario analyses prior to 2017 – AGL Energy, BHP Billiton, Rio Tinto, Westpac.
Table of Findings – ASX50 Companies’ response to TCFD
Note – ‘High risk’ in this table refers to those sectors identified by the TCFD as having “the highest
likelihood of climate-related financial impacts”
| Company | Sector | Is Climate Change considered a Material Business Risk? | What has the company said about the TCFD? | Classification |
|---|---|---|---|---|
| AGL Energy Limited | Utilities | Yes: “Transition to low emissions technology” is identified as a “factor critical to the successful delivery of its business strategies and future prospects” (p17, 2017 Annual Report) | A blog post about its publication (not specific to AGL) | Produced scenario analysis |
| Amcor Limited | Materials | No: “GHG Emissions and Climate Change” identified as a sustainability issue (p11, 2017 Sustainability Review) | No mention | No commitment – high risk |
| AMP Limited | Financials | No | No mention | No commitment – high risk |
| APA Group | Utilities | No: mentioned in Managing Director’s report – “APA acknowledges that climate change is a real risk and we support Australia’s commitment under the Paris Agreement to reduce emissions by between 26 and 28 per cent on 2005 levels by 2030.” (p5, 2017 Annual Report) | “We have elected, wherever practicable, to follow the framework recently released by the Task Force on Climate-related Financial Disclosure which enables us to set out the relationship between our business and climate change in the context of governance, strategy and risk management.” (Website) | Commitment to TCFD |
| Aristocrat Leisure Limited | Consumer Discretionary | No: “It is the Company’s view that climate change does not pose any significant risks to its operations in the short to medium term.” (p8, 2016 Annual Report) | No mention | No commitment – low risk |
| ASX Limited | Financials | No | No mention | No commitment – low risk |
| Aurizon Holdings Limited | Industrials | Yes: “The long-term implications of climate change may impact Aurizon on several fronts. For example: – Increased regularity or severity of weather events causing disruptions to operations and significant damage to assets – Reduced appetite for funding either for Aurizon and/or for Aurizon’s customers Increased regulation and/or reduced ‘licence to operate’ in the community, making various approvals and licenses more cumbersome and costly to achieve.” (p22, 2017 Annual Report) |
“Adoption of Task Force on Climate-related Financial Disclosures (TCFD) recommendations” (2017 Sustainability Report) | Produced scenario analysis |
| Australia And New Zealand Banking Group Limited | Financials | Yes: “Credit Risk incorporates the risks associated with us lending to customers who could be impacted by climate change or by changes to laws, regulations, or other policies adopted by governments or regulatory authorities, including carbon pricing and climate change adaptation or mitigation policies.” (p34, 2017 Annual Report) | “While the final recommendations will be released in the coming months, our intention is to adopt many of them as soon as practicable. We believe the recommendations for the banking sector are reasonable and can largely be met through our existing regulatory and voluntary reporting.” (p8, 2017 HY Sustainability Report) | Commitment to TCFD |
| BHP Billiton Limited | Materials | Yes: “The impact of climate change may increase competition for, and the regulation of, limited resources, such as power and water. These factors could materially and adversely affect the expansion of our business and ability of our assets to operate efficiently.” (p35, 2017 Annual Report) | “We are strongly committed to continuing to work with the TCFD to retain our position as an industry leader in climate-related disclosures and transparency. Our climate change public disclosures are aligned with the newly issued recommendations of the TCFD.” (p35, 2017 Sustainability Report) | Produced scenario analysis |
| Brambles Limited | Industrials | No | No mention | No commitment – low risk |
| Caltex Australia Limited | Energy | No | No mention | No commitment – high risk |
| Commonwealth Bank of Australia | Financials | Yes: “We consider climate change to be a significant long term driver of both financial and non-financial risks. Addressing that risk is core to our business strategy as climate change has the potential to impact our relationships with customers as they adjust their preferences and behaviours, our systems and processes, our costs, and the value of our loans to affected industries.” (p24, 2017 Annual Report) | “We will adopt the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations and continue to disclose relevant information to leading indices and continue to provide leading disclosure on the emissions intensity of our business lending portfolio” (Climate Policy Position Statement) |
Commitment to TCFD |
| Computershare Limited | Information Technology | No | No mention | No commitment – low risk |
| CSL Limited | Health Care | No: “Environmental and climate change risks and control measures continue to be monitored to ensure compliance to new and emerging regulatory requirements.” (p58, 2017 Annual Report) | No mention | No commitment – low risk |
| Dexus | Real Estate | Yes: “Assets are impacted by climare change either through loss of value, through damage caused by increased severe weather events, or sea level change” (p29, 2017 Annual Report) | No mention | No commitment – high risk |
| Fortescue Metals Group Limited | Materials | No: “Climate Change is a global challenge and we will continue to monitor and actively manage the associated risks and opportunities.” (p5, 2017 Corporate Social Responsibility Report) | “Fortescue is evaluating the final recommendations from the TCFD. In addition, we are currently updating and refreshing a business-wide risk and opportunity analysis associated with climate change that will inform our future business strategy and related public disclosures.” (Letter to MF) | Commitment to TCFD |
| Goodman Group | Real Estate | No | No mention | No commitment – high risk |
| GPT Group | Real Estate | No | No mention | No commitment – high risk |
| Incitec Pivot Limited | Materials | Yes: “Seasonal conditions (particularly rainfall), are a key factor for determining demand and sales of explosives and fertilisers. Any prolonged adverse weather conditions, including the potential impacts of climate change, could impact the future profitability and prospects of IPL.” (p21, 2017 Annual Report) | No mention | No commitment – high risk |
| Insurance Australia Group Limited | Financials | No: identified as a material issue – “Climate change is having an impact on the frequency and severity of natural perils which poses a significant challenge to the insurance industry, and the communities we support.” (p9, 2017 Sustainability Report) | No mention | No commitment – high risk |
| James Hardie Industries Plc | Materials | Yes: “Severe weather, natural disasters and climate change could have an adverse effect on our overall business.” (p156, 2017 Annual Report) | No mention | No commitment – high risk |
| Lendlease Group | Real Estate | Yes: “The world is experiencing the impacts of climate change. These impacts are likely to increase in the future and pose an increased risk to the safety of communities as well as having the potential to damage real estate and infrastructure.” (p60, 2017 Annual Report) | No mention | No commitment – high risk |
| Macquarie Group Limited | Financials | No: identified as an ESG risk only – “Climate change presents significant challenges to society and generates both risks and opportunities for Macquarie’s business and stakeholders. Consistent with its strong risk management focus, Macquarie considers climate change and future carbon constraints within the existing risk framework.” (p26, 2016 Annual Report) | No mention | No commitment – high risk |
| Medibank Private Limited | Financials | No | No mention | No commitment – high risk |
| Mirvac Group | Real Estate | No: “Given our reliance on water and exposure to the elements, as well as the long lifespans of our assets, it is important that we understand, inform, and minimise the risks climate change presents to our business, from damage caused by flooding or hailstorms, to loss of property value or insecurity of tenants’ tenure.” (p45, 2017 Annual Report) | No mention | No commitment – high risk |
| National Australia Bank Limited | Financials | Yes: “Climate change may present risks arising from: extreme weather events that affect property or business operations, effect of new laws and Government policies designed to mitigate climate change, and impacts on certain customer segments as the economy transitions to renewable and low-emission technology. A consequence of these factors includes the risk of the Group and its customers holding stranded assets.” (p14, 2017 Annual Report) | “Key risk actions arising from the CCWG’s work were to: – participate in a UN Environmental Program Finance Initiative (UNEP FI) pilot project with other UNEP FI member banks to test recommendations made by the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures. This project aims to develop scenarios and stress test participating bank loan books and will help the Group meet the commitment it made in 2014 to expand and improve the Group’s carbon-related disclosure” (p26, 2017 Annual Report) |
Commitment to TCFD |
| Newcrest Mining Limited | Materials | Yes: “Any increased frequency of severe weather events such as floods, drought, and cyclones, which may be attributed to climate change, may negatively affect these operations by restricting access to site and causing damage to property.” (p69, 2017 Annual Report) | No mention | No commitment – high risk |
| Oil Search Limited | Energy | Yes: “The impact of climate change is an emerging risk for the Group which could result in a number of adverse outcomes, including changes in demand for the Group’s products, uncertainty regarding emerging policy and regulations, or reputational risks associated with increasing stakeholder activism and changing investor expectations.” (p77, 2016 Annual Report) | “The draft TFCD Recommendations were released in December 2016, with consultation closing in February 2017. These draft recommendations will not be formally adopted until June 2017. In anticipation, Oil Search considered earlier versions in the development of our strategy and our planned disclosures. However, we will not be fully compliant until the Recommendations are formally adopted and we have an opportunity to evaluate them in their final form.” (p3, Oil Search and Climate Change) | Commitment to TCFD |
| Orica Limited | Materials | No: Climate change identified as a “key sustainability issue” (p25, 2017 Annual Report) | No mention | No commitment – high risk |
| Origin Energy Limited | Energy | Yes: “Origin has broad exposures to energy market decarbonisation, which includes decreased demand for fossil fuels in some markets, reduced lifespans of higher carbon-intensive assets, increased regulation of greenhouse gas emissions from operations and consumer shifts to lower-carbon sources of energy.” (p34, 2017 Annual Report) | “We believe our existing governance and reporting framework covers many of these recommendations and have made commitments for additional disclosures, including the adoption of a company-wide science based emissions reduction target. We will review the TCFD recommendations in detail over FY2018 with a view to further improving our disclosures.” (p8, 2017 Sustainability Report) | Commitment to TCFD |
| Qantas Airways Limited | Industrials | Yes: “The Qantas Group is subject to short and long-term climate-related physical, regulatory and transition risks.” (p23, 2017 Annual Report) | “From 2018, we intend our climate change disclosures to align with the recommendations of the Taskforce on Climate-related Financial Disclosures.” (p27, 2017 Annual Review) | Commitment to TCFD |
| QBE Insurance Group Limited | Financials | No: “QBE’s Global Emerging Risks Group continued to examine the impact of emerging and developing risks, including climate, technology and social change.” (p28, 2016 Annual Report) | No mention | No commitment – high risk |
| Ramsay Health Care Limited | Health Care | No: “The Company does not consider that it has any material environmental or social sustainability risks” (p25, 2017 Annual Report) | No mention | No commitment – low risk |
| Rio Tinto Limited | Materials | Yes: “Recognised hazards and threats include, among others, underground operations, aviation, pit slope instability, tailings facilities, vector-borne and pandemic disease, chemicals, gases, vehicles and machinery, extreme natural environments, endangered flora or fauna, areas of cultural heritage significance, water supply stress and climate change.” (p19, 2016 Annual Report) | “We are reviewing the TCFD recommendations against our current disclosure commitments” (p16, Sustainable Development Workshop 2017) | Produced scenario analysis |
| Santos Limited | Energy | No: mentioned under Environmental Regulation – “Santos has a comprehensive approach to management of environmental, health and safety risks, which includes technical, operational and asset reliability and integrity standards and competency requirements designed to ensure it meets regulatory requirements and industry standards” (p26, 2016 Annual Report) | “To this end we have committed to review the Financial Stability Board’s Task Force for Climate-related Financial Disclosures for future reporting” (p4, Statement on Climate Change Disclosure) | Commitment to TCFD |
| Scentre Group | Real Estate | No: “Assessment of material economic, environmental and social sustainability risks forms part of the Group’s Enterprise Risk Management Framework. Details regarding this assessment will be included in the Group’s Sustainability Report” (p79, 2016 Annual Report) | No mention | No commitment – high risk |
| Sonic Healthcare Limited | Health Care | No: “Sonic’s Board does not believe the Company has any material exposure to environmental or social sustainability risks.” (p23, 2017 Annual Report) | No mention | No commitment – low risk |
| South32 Limited | Materials | Yes: “Climate change can impact a business’ revenue and expenditure in several ways. This could result in exposure to carbon pricing, litigation, changes in technology, changing demand and supply conditions, reputational impacts and physical impacts from climate change, depending on how we and broader society respond.” (p20, 2017 Annual Report) | “Following the TCFD guidelines, we are openly sharing how we view and respond to climate change issues, which are explained in detail in this communication.” (p1, Our Approach to Climate Change) | Produced scenario analysis |
| Stockland | Real Estate | Yes: “For example climate change risks and opportunities are reflected in several risks listed below: extreme weather events, changing regulation, and the ability to develop products that meet anticipated future demand.” (p15, 2017 Annual Review) | No mention | Produced scenario analysis |
| Suncorp Group Limited | Financials | Yes: “Impacts of climate change, significant weather events and natural hazards that exceed expectations.” (p14, 2017 Annual Report) | “Through our Climate Change Action Plan, we will examine the recommendations to take account of climate-related issues and the financial impact that climate risks could have on our organisation.” (p25, 2017 Annual Review) | Commitment to TCFD |
| Sydney Airport | Industrials | No: Identifies climate change as a material issue in its Sustainability Report (p8, 2016 Sustainability Report) | No mention | No commitment – high risk |
| Telstra Corporation Limited | Telecommunication Services | No: Identifies climate change and energy as a “focus area” of sustainability – “Mitigating climate change impacts and helping our customers and communities to do the same.” (p28, 2017 Annual Report) | No mention | No commitment – low risk |
| Transurban Group | Industrials | No: Acknowledged in its Sustainability Report – “In the 2016/17 financial year (FY17), we carried on with our commitment to do what is right for climate change and committed to halving our greenhouse gas (GHG) emissions by 2030.” (p1, 2017 Sustainability Report) | No mention | No commitment – high risk |
| Treasury Wine Estates Limited | Consumer Staples | Yes: “Climate change, agricultural and other factors, such as disease, pests, extreme weather conditions, water scarcity, biodiversity loss and competing land use, create increased risk that TWE will be unable to fulfil demand.” (p14, 2017 Annual Report) | No mention | No commitment – high risk |
| Vicinity Centres | Real Estate | Yes: “Climate change presents both direct and indirect risks for Vicinity now and increasingly over the longer term. Extreme weather events such as heatwaves, cyclones and flooding increase the physical vulnerability of our centres and their communities, which may impact our operational costs, asset values, consumer visitation and retail sales” (p19, 2017 Annual Report) | No mention | No commitment – high risk |
| Wesfarmers Limited | Consumer Staples | Yes: Climate change is identified as an operational risk (p21, 2017 Annual Report) | “Wesfarmers supports the recommendations of the Task Force on Climate-related Financial Disclosures which has developed voluntary, consistent climate-related financial disclosures for companies, and is committed to providing stakeholders with information in relation to how we are managing climate change risks.” (p34, 2017 Sustainability Report) | Commitment to TCFD |
| Westfield Corporation | Real Estate | Yes: “The Group is cognizant of the need to address the risks and opportunities arising from climate change. To the extent that climate change occurs the Group may experience extreme weather which may result in physical damage or a decrease in demand for its properties and indirect impacts such as increasing insurance and energy costs.” (p2, 2016 Annual Financial Report) | No mention | No commitment – high risk |
| Westpac Banking Corporation | Financials | Yes: “Climate change may have adverse effects on our business: We and our customers may be adversely affected by the physical risks of climate change, including increases in temperatures, sea levels, and the frequency and severity of adverse climatic events including fires, storms, floods, and droughts. These changes may directly impact us and our customers through reputational damage, environmental factors, insurance risk, and an increase in defaults in credit exposures.Initiatives to mitigate or respond to adverse impacts of climate change may in turn impact market and asset prices, economic activity, and customer behaviour, particularly in geographic locations and industry sectors adversely affected by these changes. Failure to effectively manage these transition risks could adversely affect our reputation, business, prospects, financial performance or financial condition.” (p104, 2017 Annual Report) |
“Continued to report climate related disclosures in our annual Sustainability Performance Report and commenced alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)” (p114, 2017 Annual Report)
“Through our participation on the (European Commission’s) expert group, we issued a joint statement of support for FSB’s TCFD.” (p44, 2017 Sustainability Report) |
Produced scenario analysis |
| Woodside Petroleum Limited | Energy | Yes: “Woodside faces climate change risks including changes in product demand, carbon pricing, uncertainty surrounding future regulatory frameworks and increased stakeholder expectations.” (p59, 2017 Annual Report) | “The G20 Financial Stability Board Task Force for Climate Related Financial Disclosure has prepared a series of recommendations on how to present climate-related risk. Many of these recommendations are covered by our Carbon Disclosure Project (CDP) disclosure, and we will review the remaining Task Force recommendations in 2017.” (p33, 2016 Sustainable Development Report) |
Commitment to TCFD |
| Woolworths Limited | Consumer Staples | No: identified as a generic risk – “The Group’s performance could also be affected by other generic risks that apply to most businesses and Australian households (e.g. unfavourable changes to the macro-economic environment, climate change and emerging risks).” (p25, 2017 Annual Report) | No mention | No commitment – high risk |