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Expectations set for Boral’s next steps on climate risk

6 November 2019

6 November 2019

As a major greenhouse gas polluter with exposure to the coal power sector, Boral still has plenty of work to do on climate risk management.

Two years ago, Boral didn’t think climate change posed a significant risk to its business. For a company that in 2017 had a $300 million energy bill, a 2.5 million tonne direct carbon footprint, and lost $10 million due to hurricane activity, this was an indefensible position.

It was clear from today’s annual general meeting that Boral has started to understand its exposure to climate risk, with the company having conducted a climate change scenario analysis and also reported significant reductions in greenhouse gas emissions in recent years.

However, coming from the low climate risk management base shown in 2017, the company and its investors still have much work to do to align Boral’s operations and strategies with the climate goals of the Paris Agreement.

Emission reduction targets

By far the most important element of climate risk management Boral needs to undertake is setting short, medium and long term targets to reduce greenhouse gas emissions across its value chain, which are demonstrably aligned with the Paris climate goals. Strategies to meet these targets would ensure Boral transitions to a clean, sustainable business model.

Launched in 2017, the Climate Action 100+ investor initiative seeks to secure commitments from target to companies to “Take action to reduce greenhouse gas emissions across their value chain, consistent with the Paris Agreement’s goal of limiting global average temperature increase to well below 2 degrees Celsius above pre-industrial levels.”

However, after two years, just 6% of target companies have set Paris-aligned emission reduction targets. Boral is one of the vast group of CA100-listed companies that have failed to set these targets.

Boral’s annual report states that the company intends to update its 2023 emissions intensity reduction target in the next year. When asked whether this update would see targets that meet the CA100’s asks, Boral could only confirm that it would be “aligned with 2 degrees.”

This would fall short of the multi-timeframe, full value chain, well-below-2° targets being called for by CA100 investors. Those investors must therefore step up and demand Paris-aligned action to cut greenhouse gas emissions across Boral’s value chain.

Scenario analysis

For the first time, Boral’s 2019 disclosures included an analysis of how its cement business may be impacted by different climate change scenarios. However, two of the three scenarios it considered envisage coal power being phased out by 2050, and the other by 2035.

Climate Analytics research has found that to meet the Paris goals, OECD nations need to phase out coal power by 2030. Financial institutions – including QBE and Commonwealth Bank locally, and many more overseas – have plans to exit the thermal coal sector by 2030.

When asked what the financial impacts a 2030 coal phase-out date would have on Boral, the company couldn’t provide answers at today’s meeting. However, Boral recognised moves to phase out coal power by 2030 and committed to assessing the impacts on its cement business in the next two years.