24 November 2017
We found out today at their respective annual general meetings that both AWE and Horizon Oil do not classify climate risk as a material business risk, despite both companies’ business models relying on continued fossil fuel exploration and production.
Horizon Oil CEO admitted to shareholders that climate change disclosure through the Carbon Disclosure Project framework is “something that I don’t really have any great understanding of”. This was in response to a shareholder’s question about the company’s commitment to the Paris Agreement and why they have declined to make emission disclosures to CDP in the past.
Other questions from shareholders revealed an extraordinary lack of preparedness for climate change. Amongst other confessions, Horizon Oil said it had not conducted scenario analysis within 2°C warming framework and may not implement the Task force for Climate related Financial Disclosure (TCFD) final recommendations in their financial reporting for the upcoming year.
While AWE did not directly answer a question posed on whether they would sign up to the TCFD recommendations, they seemed to understand the issues better than Horizon Oil, commenting that they recognised the world was shifting to a renewable future. However AWE incorrectly insisted that ‘gas is part of the solution, not part of the problem’ in Australia’s shift to a net zero carbon economy. Similar reasoning was espoused by Horizon Oil, who have plans to transition from oil towards gas from 2020 onwards. Perhaps neither company has read the recent Friends of the Earth Europe report, which states that “there is categorically no role for bringing additional fossil fuel reserves, including gas, into production” under the terms of the Paris Agreement.
A representative of Horizon Oil’s external auditor, PwC, explained that the firm had not been directed to examine climate change as be material to the Horizon’s business. When asked a similar question by shareholders, AWE’s auditor commented that ‘it remains our view that they [climate risks] are not material and they don’t require disclosure’. A legal opinion authored by Noel Hutley SC and James Mack, commissioned by the Centre for Policy Development, stated that directors who fail to properly consider the risks associated with climate change could be held personally liable for breaching their duties to investors.
Recent figures released by the International Energy Agency demonstrate how $1.3 tn of oil and gas have the potential to become stranded assets. It’s therefore particularly worrying that oil and gas companies like Horizon Oil and AWE have not considered climate risks associated with their operations. It’s only reasonable that shareholders would expect a greater level of disclosure and readiness in the years to come. At this stage in the game, it’s already very late for these companies to be commencing action on climate risk.
Is your superfund invested in companies like AWE and Horizon Oil? Find out here, and tell your superfund to divest from fossil fuels.