4 October 2018
With its high proportion of coal and gas producers, the ASX All Australian 50 index has been rated the most exposed market to potential stranded [fossil fuel] assets. These are coal, oil and gas reserves that cannot be burnt if we want to stay well below two degrees of warming.
Yet when asked by shareholders if the auditors of ASX Limited, the company that manages and makes its money from a healthy stock market, classified climate risk as a material business risk, the answer was no. When a shareholder asked if the board supported the Paris climate goals, chairman Rick Holliday-Smith said: “They are national policy issues… the board is not going to have views on those that are going to be publicly disclosed.”
In stark contrast to ASX’s silence on climate change, Market Forces Investing in the Dark research shows that the majority of ASX100 companies accept the science of climate change.
It is also widely accepted that climate change poses serious financial risks to companies and economies globally. Geoff Summerhayes, one of the top officials for the Australian Prudential Regulation Authority (APRA), has said “climate risks also have potential system-wide implications that APRA and other regulators here and abroad are paying much closer attention to.”
However, when pressed on the serious risks climate change could have on ASX’s business, the chairman claimed he had read articles that said “over the next 20 years there are positive things happening”. Although he then admitted he had no idea of the implications.
When asked by a shareholder if the ASX’s business strategy was consistent with two degrees of warming, the chairman re-iterated again that climate change did not pose a material business risk to the company. He explained that the company tried to have green buildings and use recycled paper where they can, but did not see how climate change would be a financial risk to the company.
The shareholder pressed that ‘if there was a radical change in business practices in this country’ with a transition from fossil fuels to renewable energy, ‘has the board assessed whether there is a risk to the ASX from the possible collapse of fossil fuel companies?’
Again, it was made clear that ASX considered climate risk to be confined to individual companies, rather than the wider market.
See the whole interaction here:
The ASX needs to be doing more to manage climate risk – as do most companies on the ASX. Click here to call on your superfund to enforce climate risk management.