Full audio of ASIC Commissioner John Price’s address and the panel discussion at our public forum is here:
CPD has released its latest report on how Australian companies, investors and policymakers can manage climate risks and support a transition to a zero carbon economy.
Climate Horizons: Scenarios and Strategies for Managing Climate Risk was written by Sam Hurley and Kate Mackenzie and features input from ClimateWorks Australia. It builds on a 2017 discussion paper which set out five essential principles for high-quality climate risk analysis by Australian firms and investors.
The report shows that, a year on from the TCFD’s landmark report on how businesses should disclose climate change risks, more Australian companies are considering what climate change and the Paris Agreement mean for their strategies and investments.
However, serious deficiencies remain in the quality and consistency of climate-related disclosures – especially on the TCFD’s landmark recommendation that companies 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.
|Full report||Executive summary||Media release|
|The climate risk reporting journey: A corporate governance primer|
Climate Horizons builds on CPD’s influential research and policy development on climate-related risks since 2016. This included the landmark legal opinion by Noel Hutley SC and Sebastian Hartford-Davis on company directors’ duties to consider and disclose climate-related risks. MinterEllison’s Sarah Barker, who was the instructing solicitor on the Hutley opinion, has provided a primer on climate risks for company directors to accompany the report: see The climate risk reporting journey: A corporate governance primer.
Listen to an audio recording of the full event here.
Climate Horizons was discussed at a CPD public forum in Sydney on financing a sustainable economy on 18 June. The event featured a keynote address by ASIC Commissioner John Price on ASIC’s views and priorities on climate-related risks.
“Indeed, directors would do well to carefully consider the memorandum of opinion by Noel Hutley QC and Sebastian Hartford-Davis on climate change and directors duties which was commissioned some time ago by the host of this evening’s event. …the Hutley opinion highlights and reinforces the need for directors to adopt a probative and proactive approach in assembling the information reasonably required to inform their decision making in this area.”
“Generally, we encourage companies and directors to carefully consider the TCFD’s report, not just in the disclosure context, but as a key resource to assist in understanding, identifying and managing climate risk and climate opportunity.”
The event followed a similar CPD forum in November 2017, when APRA’s Geoff Summerhayes provided the influential speech “The weight of money: a business case for climate risk resilience.”
Media coverage of Climate Horizons research and CPD’s public forum
ASIC puts directors on notice over disclosure on climate change risks, Michael Roddan, The Australian, 19 June 2018
ASIC recommends voluntary disclosure of climate risks, Misa Han, The Australian Financial Review, 19 June 2018
ASIC warns on climate risk as heat turns on directors, Clancy Yeates, The Sydney Morning Herald, 19 June 2018
Whitehaven Coal, Yancoal, New Hope must ramp up climate disclosure, Ben Potter, The Australian Financial Review, 21 June 2018
Australian firms told to catch up on climate change risk checks, Lisa Cox, The Guardian, 18 June 2018
Australian shareholders should be told of climate risks to profits, says think tank, Gareth Hutchens, The Guardian, 29 November 2017
Key links and related reading
Time for an Australian Sustainable Finance Taskforce, SMH/Age opinion piece, Travers McLeod and Sam Hurley, July 2018
Climate Horizons: next steps for scenario analysis in Australia, CPD discussion paper, Sam Hurley and Kate Mackenzie, November 2017
Climate change, Keynote address by John Price, Commissioner, Australian Securities and Investments Commission, Centre for Policy Development: Financing a Sustainable Economy, Sydney, Australia, 18 June 2018
Australia’s new horizon: Climate change challenges and prudential risk, Geoff Summerhayes, February 2017
Legal opinion on directors duties and climate change, Noel Hutley SC and Sebastian Hartford-Davis, October 2016