Investors raise bar on climate targets for ASX200

A surge in adoption of net-zero emissions commitments by Australia’s leading companies has
emerged as the latest strategic front in managing climate change exposures, according to a new
report by the Australian Council of Superannuation Investors (ACSI).

ACSI’s annual benchmark analysis of public disclosures by ASX200 companies shows that boards
and management are, in the main, responding to investor demands for in-depth discussion of how
they are measuring and managing climate risk and opportunities.

The analysis indicates that the Task Force on Climate-related Financial Disclosures (TCFD)
framework, first rolled out in 2017, has now become the most common benchmark for companies’
reporting in high-risk sectors.

ACSI found a 5 times uplift on TCFD adoption by ASX200 companies, driven by those in high-risk
sectors, as they strive to align their businesses to meeting Paris Agreement targets and avert the risk
of stranded assets and operations.

ACSI’s research benchmarks all corporate disclosures filed up to 31 March 2020. The research is
released as ASX200 companies begin to announce FY20 performance numbers and new climate
targets.

Key Findings:

  •  Eighteen ASX200 companies had set net-zero aspirations, and we continue to see further
    adoptions this reporting season. However, more work is required to demonstrate pathways
    to net zero and we have been engaging with companies this year on how their short and
    medium-term strategies are aligned to a pathway for achieving net-zero commitments.
  • Science-based targets are gaining traction. In FY19 companies that had adopted sciencebased climate targets included Origin Energy, Dexus, SkyCity Entertainment, Fletcher
    Building, QBE Insurance, Insurance Australia Group and Suncorp. We expect the trend to
    continue in FY20 as demonstrated by BHP’s recent announcement.
  • Five-fold increase of TCFD adoption by the ASX200 – with 56% of higher-risk industries now
    reporting against the framework. In 2019, 60 ASX200 companies had adopted the framework
    up from only 11 companies in 2017. A further 14 companies have committed to disclose
    against the framework.
  • Proliferation of companies using scenario analysis to stress test their business. Of the 60
    companies that reported against the TCFD, 32 undertook scenario analysis in 2019
    (compared to 18 in 2018). A further 28 were reported as either having the analysis currently
    in progress or planned for in FY21. There are still a wide variety of scenarios being used but a
    growing number of companies are now using 1.5-degree pathways.
ACSI CEO Louise Davidson said,
 
“ACSI’s members invest for the long-term benefit of their members – and climate change is one of the greatest challenges that they are integrating into their investment strategies.
 
“As a result, ACSI has been driving companies to clearly demonstrate how they are adapting their operations to manage the risks and opportunities of climate change – to provide investors with comfort that they are making active decisions and commitments to secure their place in a low carbon world.”
 

“The uplift of net-zero and other carbon reduction commitments in the ASX200 demonstrates that this is fast becoming the ‘new normal’ for leading companies.”

Significantly, 18 companies had set net-zero emissions in their FY19 reporting and, following further
engagement with investors, a number of companies have further developed their positions in
reporting for the 2020 financial year – including BHP’s new climate targets and strategy, Fortescue
Metals committing to net-zero emissions by 2040, Telstra deploying a carbon neutral strategy from
this year and the property sector aligning to net zero well before 2050.

“Climate risks are deeply embedded in the financial system and have impact on all sectors and asset classes. Investors require detailed disclosure of climate-related risks to adequately understand their investment exposure and consider the impacts of transition and physical risks.”

As shown in ACSI’s research we continue to have a focus on higher-risk sectors doing and disclosing more.

“While it is pleasing to see more high-risk companies providing good disclosure, many companies
have yet to do so.”
Ms Davidson said.

“Disclosure of risks is only the first step. Companies must reflect on how climate change will impact
them over the long-term and how they intend to manage that exposure.”

“Investors want to understand how companies are stress-testing their businesses and how this is informing company strategy, and actions, over the short and medium-term to meet the Paris goals,” she said.

 
For additional information please contact:
Nathan Robertson
P: 0423874662
E: nrobertson@acsi.org.au

 

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