23 November 2018
“Our targets are based on the… Australian [emissions] requirement” chairman John Bevan told shareholders at Bluescope Steel’s annual general meeting (AGM) today in Sydney, where climate change was a hot topic.
Whilst acknowledging support for the global Paris climate accord, the steel manufacturing giant said its emissions goals were based on Australia’s Nationally Determined Commitment (NDC). These require emissions to be cut by 26-28 per cent on 2005 levels by 2030. Watch below:
Unfortunately, Australia’s NDC is consistent with a 3ºC or more global warming outcome, according to Climate Action Tracker, therefore out of step with the Paris limit of between 1.5ºC and 2ºC.
Hungry for coal power
Bluescope is one of Australia’s major consumers of energy, requiring large amounts for its smelting, furnace and production operations. The company was recently exempt from tough import tariffs in the US thanks to an in-principle agreement between the Trump administration and the Australian government. Bevan noted during the meeting that “energy costs in the US were a third of Australia’s.”
Trump’s climate policy is undoubtedly archaic, having signalled an intention for the US to withdraw from the Paris climate agreement and favouring coal as a source of power. Similarly, Manufacturing Australia – a lobby group of which Bluescope is a member – has been pushing for an extension or a coal-fired solution to replace the Liddell power station slated to close in 2022.
When a shareholder asked whether Bluescope agrees with the lobby group’s position, Bevan responded: “Clearly if you take capacity out of the market in total – whether it be renewable, coal, gas or whatever – there is less energy for everyone to use and prices will go up. From an affordability perspective, we need to be cautious in terms of changing all of our current power stations to something else unless there is enough sufficient, reliable power there to continue our business…” Watch below:
Disclosing the risks
It should be acknowledged that Bluescope has made some progress in terms of its climate related financial disclosures and risk assessment. The company has made a start on disclosing these climate risks, joining over 500 international companies (worth approximately $8 trillion US) who are adopting the recommendations of the G20-led Task Force for Climate-related Financial Disclosures (TCFD) in their financial reporting.
A core TCFD recommendation is that companies describe the resilience of their strategies under different climate-related scenarios, including a 2°C or lower scenario. This involves stress testing a company’s business plan against different climate scenarios, including one in which global warming is kept well below 2ºC.
But while Bluescope says it follows a “global cooperation scenario”, it’s unclear what degree of warming corresponds to each scenario considered, and what the underlying assumptions are. There’s also no quantitative data to back up the company’s analysis.
Investors need more information to enable an accurate assessment of the company’s climate risk resilience. Disclosing such information is becoming common practice, with many companies already doing so.
But when asked by shareholders if Bluescope planned to disclose such information, Bevan said: “Generally we wouldn’t disclose it. But that’s a very good question to ask and let me take that on notice. I’ll think about how we would do that.”