Why is it important?
In late 2015, Australia, with nearly 200 other countries, signed up to the Paris Agreement, which sets out the goal of limiting global warming to well below 2 ºC and moving towards 1.5 ºC which will require a shift to net zero emissions by 2050.
Climate change presents financial risks, as well as opportunities for business and investors. There are physical risks and opportunities associated with rising mean global temperatures, rising sea levels and increased severity of extreme weather events, and transitional risks and opportunities as the economy adjusts to a lower carbon future. These risks are deeply embedded across the financial system.
Companies should, within their governance, strategy and risk management processes, recognise and manage climate change-related risks and opportunities relevant to their businesses. Companies should also disclose the risks and opportunities relevant to them, along with any action taken to manage those risks and maximise opportunities. Improved and consistent disclosure about climate risks and opportunities will enable investors to more effectively consider climate risk in their investment decisions.
Companies should also disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities. We support the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) risk assessment and reporting framework.
We expect a company’s advocacy activity (including the activity of its industry associations) to be consistent with its policy positions.
We are a member of the Investor Group on Climate Change (IGCC) and support an efficient transition to a low-carbon economy. We endorse the mission of the IGCC, which includes a recognition that climate change will impact investments, that there is an economic transition underway and it is accelerating. We support a response that is founded in a science-based assessment of the carbon constraints required to avoid dangerous climate change, and acknowledge that investors are key agents in facilitating an efficient transition. We believe a planned transition to a low carbon economy is preferable to a disorderly transition, on the basis that a planned transition will result in better economic outcomes, is better able to take account of the needs of various stakeholders, and better manage uncertainty and volatility.