27 October 2020
Climate change risk was once again on the agenda at Boral’s annual general meeting today, as it has been since 2017.
Despite the clear expectations set by shareholders over these past years, Boral progress on addressing both the physical and transitional risks climate change poses to its business has been slow.
Bushfires hit hard
Boral’s 2019 Review identified physical climate change risks, including property damage and disruption to logistics or supply chain across Boral’s network, may impact the company in the medium to long term (10 to 20+ years).
This was surprising given the potential link between climate change and the company’s $10 million losses due to hurricane activity in the US was pointed out to the company back in 2017. It is well known that the physical effects of climate change are already impacting businesses.
Last summer’s Australian bushfires cost Boral $25m in earnings in FY2020.
The company’s 2020 Review correctly updated its assessment of physical climate risks, recognise these risks are short term and ongoing.
Shareholders wanted to know why Boral failed to recognise physical climate impacts as short term risks in the 2019 review, asking: Wouldn’t Boral have been better prepared to manage physical risks, like worsening bushfire conditions, if it had got the risk assessment right in 2019?
In response, CEO Zlatko Todorcevski seemed to throw his predecessor under the bus, saying he is very happy with the climate risk work undertaken since he had come on board from 1 July 2020.
Transition risk management also delayed
On the other side of the climate risk coin is transitional risk: the market and regulatory changes required to reduce emissions and limit global warming.
Boral is a major greenhouse gas emitter, with operational emissions of 2.2 million tonnes of carbon dioxide equivalent in FY2020, and a further 3.1 MtCO2-e of value chain (scope 3) emissions. This combined emissions footprint is equivalent to over a million cars on the road for a year.
Emission reduction policy, including carbon pricing, risks destroying value for companies with large emissions profiles. The best way to manage this risk is for companies to proactively set targets and strategies to reduce emissions across their value chains in line with the Paris climate goals.
Boral was expected to set Paris-aligned science-based targets and emission reduction pathways in FY2020, but this work has been delayed, with the targets now expected in FY2021.
In response to shareholder questioning, Mr Todorcevski confirmed the work was still ongoing, but couldn’t provide any more specific details as to when the targets and strategies will be announced.
Mr Todorcevski did confirm that short-, medium-, and long-term targets are being considered, and they will include Scope 3 emissions in line with the ? Yes, in line with the requirements of the Science-Based Targets initiative.