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Australian companies still failing to properly disclose climate risk

Last updated: 31 December 2018

For the most up-to-date research on the 22 Australian companies undermining climate action, view our Out of Line, Out of Time report:

Australia’s largest companies are paying lip service to climate risk, but failing to demonstrate strategic responses.

In 2018, the IPCC made clear the scale and urgency of the low-carbon transition required to avoid the worst impacts of climate change. But the glaring lack of detail in Australian companies’ climate risk disclosures suggests they are unprepared for this transition.

Since Market Forces first conducted this research at the start of 2018, companies have become more willing to acknowledge climate change risks. However, very few have fully detailed the potential implications of these risks for their own business. Even fewer have disclosed plans to transition to a business model that aligns with the Paris climate goals.

Investors must demand companies demonstrate their ongoing viability in a scenario where global warming is limited to 1.5°C. Any company that is unable or unwilling to do so must face divestment.

Check out the detailed findings and complete company scorecard below. You can also download a copy of the updated PDF report released in February 2019 here.

*To complete this research, Market Forces analysed the public disclosures of the 72 ASX100 companies (as of December 2018) that operate in sectors highlighted by the TCFD as facing the highest levels of climate risk. This research is current as of 31 December 2018.

Key findings

Proportion of ASX100 companies with high climate risk exposure that…
  • Identify climate change as a material business risk 57% 57%
  • Detail climate risks & opportunities in mainstream reporting 32% 32%
  • Disclose detailed climate change scenario analysis 14% 14%
  • Disclose an emissions reduction plan 24% 24%
  • Have set an absolute emissions reduction target 22% 22%

Of the $1.47b ASX100, $1.13b (77%) of the index operates in sectors identified by the TCFD as particularly susceptible to climate-related risks and opportunities.

Of these companies, just 57% of companies recognise climate change as a material business risk. Even fewer (32%) provide a detailed discussion of the particular risks and opportunities climate change poses to their business.

Just 14% of companies have disclosed detailed analyses showing how they will fare in different climate change scenarios, up slightly from 12% in August 2018 and 10% in March 2018. A further 21% have committed to disclose some level of scenario analysis in 2019, but it is unclear just how detailed and comprehensive these analyses will be.

Significantly, only three companies – South32, AGL and Stockland – disclose in line with all recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Commonwealth Bank, BHP, Westpac, ANZ and Dexus each come close to fully satisfying the recommendations, while Macquarie is among the companies that have committed to addressing all recommendations in their 2019 reporting.



Your Title Goes Here
Unequivocally - 65%
March 2018 - 66%

While 65% of companies have unequivocally accepted climate science, 25% are unclear in their language. The remaining 10% have not formally acknowledged the science of climate change.

Acknowledgement of climate science demonstrates that a company’s board and senior executives understand the need to decarbonise the economy, and have considered the implications this may have on their business.

Methodology: to demonstrate acceptance of climate science, the company must unequivocally acknowledge the aims of the Paris Agreement or the need to decarbonise by the second half of the century; simply mentioning climate change is not sufficient.


Who has responsibility for managing climate risk?
Board - 86%
March 2018 - 73%

At 86% of companies, the Board has overall responsibility for managing climate risk, up from 73% in March 2018. 4% of companies placed this responsibility with a non-Board level executive, while 10% of companies did not disclose any such responsibility.

The TCFD recommends companies “describe the board’s oversight of climate-related risks and opportunities.”

Methodology: responsibility for “sustainability” or “environmental, social or governance” (ESG) issues is not sufficient in this context; climate change or climate risk must be explicitly mentioned.

Does remuneration encourage emissions reduction?


Yes - 32%
March 2018 - 16%
<p><strong>32% of companies remunerate executives to reduce GHG emissions, doubling the 16% identified in March 2018. Remuneration packages are designed to drive behaviour, so more of Australia’s corporate executives should be incentivised to tackle emissions and minimise climate risk.</strong></p>
<p>Many companies state in their responses to the <a href=”#CDP”>CDP</a> (formally Carbon Disclosure Project) that some staff are remunerated for emissions reduction and/or efficiency, but formal Remuneration reports suggest this does not typically extend to senior executives.</p>
<p>Methodology: targets and KPIs described in Remuneration reports contained within Annual Reports were assessed, with further clarity drawn from CDP responses. Remuneration reports typically include senior executives only (Board, CEO and their direct reports).</p>

Risk Management

Does the company identify climate change as a material business risk?
Yes - 57%
March 2018 - 52%

Just over half (57%) of the companies studied identify climate change as a material business risk, despite all assessed companies operating in sectors determined by the TCFD to be highly exposed to climate risk.

Contrary to the TCFD recommendations, 39% of companies do not clearly define climate as a material business risk in their mainstream financial reporting.

The findings are particularly concerning in light of Noel Hutley SC’s 2016 legal opinion, stating “directors certainly can, and in some cases should be considering the impact on their business of climate change risks – and that directors who fail to do so now could be found liable for breaching their duty of care and diligence in the future.”

Methodology: climate risk (or the transition/physical impacts of climate change) must be explicitly mentioned as a principal or material risk in the annual report.

Has the company detailed the risks/opportunities from climate change in mainstream reporting?
Yes - 32%
March 2018 - 25%

Just 32% of companies provide a detailed discussion of climate risks and opportunities in mainstream annual reporting. A further 18% only provide a detailed discussion in their response to the CDP survey.

33% provide a limited discussion, while 17% do not discuss the risks and opportunities posed by climate change.

A key tenet of the TCFD recommendations is that climate risk information be included in mainstream financial reporting, and therefore readily accessible to investors, regulators and the wider public.

Methodology: ‘Detailed’ disclosure means a discussion of the risks and opportunities posed by climate change, including the expected severity and likelihood of financial impacts, and the timeframe in which these may arise.


Has the company detailed the risks/opportunities from climate change in mainstream reporting?
Yes - 14%
March - 10%

Just 8% of companies have disclosed detailed scenario analysis covering their entire business. A further 6% have disclosed detailed analysis, but only applied this to particular elements of the company or its operations.

11% of companies provide a limited discussion of scenario analysis undertaken, while 75% have not produced any analysis of how their business is expected to fare under different climate change scenarios. 

Scenario analysis is perhaps the most important of the TCFD’s recommendations, as it can provide clear measures of a company’s future viability in situations where the goals of the Paris Agreement are met. This is intended to encourage companies to understand that ‘business as usual’ is not a sustainable model. In turn, investors are able to determine the most appropriate, sustainable allocation of capital.

Methodology – disclosures were graded as follows:

  • Yes – disclosure of scenario analysis that considers a range of scenarios (including a 2°C lower scenario), provides quantitative data, and covers the company’s business comprehensively
  • Partial – disclosure of scenario analysis that considers a range of scenarios (including a 2°C lower scenario), provides quantitative data, but does not cover the entire business or operations of the company
  • Limited discussion – disclosure that provides some description of the exposure to climate risk it faces under different scenarios, but without quantitative information that allows investors to assess the extent of risk faced
  • No – where none of the above are met
Does the company have a clear plan to reduce emissions?
Yes - 24%
March 2018 - 16%

24% of companies have disclosed a clear plan to reduce their carbon emissions. This is a significant improvement on the 16% that had done so in March 2018, but is still far too low. 

The Paris Agreement requires a carbon-neutral global economy by 2050, and developed economies like Australia will need to decarbonise even sooner. Companies wanting to remain investable must disclose clear plans to reduce scope 1, 2 and 3 emissions in line with the Paris climate goals.

While a number of companies have made ambitious statements along the lines of the Paris Agreement’s aims, these are rarely backed up with concrete commitments and measurable targets.

Methodology: plans should have clear, measurable interim targets, along with detailed descriptions of how those targets will be achieved. In this context, carbon abatement – that is, the purchase of carbon offsets – is not considered an emissions reduction plan.

Metrics and Targets

Has the company set absolute emission reduction targets?
Yes - 22%
March 2018 - 27%

Along with the 22% of companies that have set absolute emissions reduction targets, a further 25% have set emissions intensity targets. In many cases, the latter allows for overall emissions to increase, provided emissions intensity decreases.

51% of companies studied have not set any clear emissions reduction targets.

With more information available than in March 2018, more companies’ emissions targets were found to be based on intensity rather than absolute reductions. Emissions intensity targets, while a useful short-term goal, should be coupled with absolute targets that match the decarbonisation pathway required to meet the Paris climate goals.

Methodology: where companies have set both absolute and intensity reduction targets, we have acknowledged the absolute target.

Does the company disclose its emissions?
Yes - 89%
March 2018 - 82%

47% of companies disclose Scope 1+2+3 emissions, while 42% disclose Scope 1+2 only. 11% of companies do not disclose their emissions at all.

Companies should disclose emissions for the current year and at least the previous year (preferably 3-5 years) in mainstream reporting.

Emissions reporting should demonstrate reductions over time, in line with the decarbonisation pathway required to meet the Paris climate goals.

Scope 1 – Direct emissions from company activities

Scope 2 – Indirect emissions from use / consumption of energy etc

Scope 3 – Indirect emissions as a consequence of company’s activities, such as extraction and production of materials purchased by the company, transportation of purchased fuels, or use of products and services sold by the company

Company Scorecard

= Yes

= Partial

= Limited / Unclear

= No

Updated 31 December 2018

CompanySectorClimate scienceRemunerationMaterial riskRisk descriptionScenario analysisEmissions reduction planEmissions reduction target
Commonwealth Bank of Australia*Financials

BHP Billiton LtdMaterials

Westpac Banking Corporation*Financials

Australia and New Zealand Banking Group Ltd*Financials

National Australia Bank LtdFinancials

Macquarie Group Ltd*Financials

Woolworths Group LtdConsumer Staples

Transurban GroupIndustrials

Woodside Petroleum LtdEnergy

Rio Tinto LtdMaterials

Scentre GroupReal Estate

Goodman GroupReal Estate

Suncorp Group LtdFinancials

Insurance Australia Group Ltd*Financials

Newcrest Mining LtdMaterials

South32 LtdMaterials

Amcor LtdMaterials

Coles GroupConsumer Staples

Sydney AirportIndustrials

QBE Insurance Group LtdFinancials

Cimic Group LtdIndustrials

Fortescue Metals GroupMaterials

AGL Energy LtdUtilities

ASX LimitedFinancials

Origin Energy Ltd*Energy

Santos LtdEnergy

Oil Search LtdEnergy

DexusReal Estate

APA GroupUtilities

Vicinity Centres*Real Estate

Treasury Wine EstatesConsumer Staples

Qantas Airways Ltd*Industrials

GPT GroupReal Estate

StocklandReal Estate

Aurizon Holdings LtdIndustrials

Mirvac GroupReal Estate

AMP LtdFinancials

Caltex Australia LtdEnergy

Lend Lease GroupReal Estate

The A2 Milk Company LtdConsumer Staples

James Hardie Industries PlcMaterials

Medibank Private LtdFinancials

Orica Ltd*Materials

Alumina LtdMaterials

Coca-Cola Amatil LtdConsumer Staples

Incitec Pivot*Materials

Bluescope Steel Ltd*Materials

Boral Ltd*Materials

Challenger Ltd*Financials

Ausnet Services LtdUtilities

Evolution Mining LtdMaterials

Bendigo And Adelaide Bank LtdFinancials

Northern Star Resources LtdMaterials

Unibail-Rodamco-WestfieldReal Estate

Atlas ArteriaIndustrials

Magellan Financial Group LtdFinancials

Whitehaven Coal LtdMaterials

Qube Holdings LtdIndustrials

Bank Of Queensland LtdFinancials

Orora LtdMaterials

Spark Infrastructure TrustUtilities

Downer EDI Ltd*Industrials

Adelaide Brighton LtdMaterials

Iluka Resources LtdMaterials

Charter Hall GroupReal Estate

CYBG PlcFinancials

OZ Minerals LtdMaterials

Duluxgroup Ltd*Materials

Pendal Group LtdFinancials

IOOF Holdings LtdFinancials

Janus Henderson Group PlcFinancials

CSR LtdMaterials

* Committed to disclosing scenario analysis in 2019
† Emissions intensity target only
‡ Detailed risk description in CDP response only

Scenario analysis methodology

Scenario analysis disclosures were graded as follows:

  • Yes – disclosure of scenario analysis that considers a range of scenarios (including a 2°C lower scenario), provides quantitative data, and covers the company’s business comprehensively
  • Partial – disclosure of scenario analysis that considers a range of scenarios (including a 2°C lower scenario), provides quantitative data, but does not cover the entire business or operations of the company
  • Limited discussion – disclosure that provides some description of the exposure to climate risk it faces under different scenarios, but without quantitative information that allows investors to assess the extent of risk faced
  • No – where none of the above are met

Company Scorecard

What is the TCFD?

The Task Force on Climate-related Financial Disclosures (TCFD) was a initiative of the G20 Financial Stability Board (FSB), which was set up in the wake of the 2008 financial crisis to try to avoid similar market shocks.

In a landmark 2015 speech, FSB Chair Mark Carney stated ” Shifts in our climate bring potentially profound implications for… financial stability and the economy.” The European Systemic Risk Board has warned that climate change could wreak havoc on financial markets.

In response to these kinds of warnings, the TCFD was tasked with considering the physical, liability and transition risks posed by climate change, and developing a consistent framework for companies to disclose those climate-related financial risks to investors, lenders, insurers, and other stakeholders.

The Task Force released its draft recommendations in December 2016, and the final version in June 2017. The framework has attracted the support of over 240 organisations, including 150 financial institutions that manage a combined AU$100 trillion.

Importantly, the TCFD recommendations identified a number of ‘high risk’ sectors, for which it suggested more robust reporting. These were: Finance; Energy; Transportation; Material and Building; and Agriculture, Food and Forest Products.


What does the TCFD mean for investors and companies?

The TCFD recommendations give investors a consistent comprehensive framework through which they can analyse the climate risk exposure of the companies they invest in, or those they are considering investing in.

With this increased understanding of risk, investors are able to make more informed decisions about capital allocation.

In turn, companies are incentivised to better consider and reduce the risks posed to their business by climate change. Companies that can’t demonstrate how they plan to survive in a carbon-constrained economy risk facing decisive action from investors, including divestment.

“Increasing transparency makes markets more efficient, and economies more stable and resilient.”

Michael R. Bloomberg, TCFD Chair

How does the TCFD compare to the Carbon Disclosure Project?

The TCFD framework recommends companies incorporate climate risk disclosures into mainstream annual financial reporting.

Financial reports are treated as formal disclosures to the sharemarket, meaning the company is accountable to the accuracy of any claims made therein.

This is an important development to the CDP system, which asks companies to respond directly to questions put the CDP.

Despite having had 15 years to get on board, less than 40% of ASX200 companies responded to the CDP in 2017. Clearly, companies are failing to self-drive a culture of comprehensive disclosure.

As shown by our research, voluntary reporting following the TCFD framework has also had little take up amongst Australian companies.

Regulatory guidance

Australian regulators ASIC, APRA and ASX Corporate Governance Council have all stepped up their public rhetoric on the issue, and are taking steps to ramp up guidance and scrutiny around climate risk disclosure.

A September 2018 ASIC report found many companies were breaking the law by failing to adequately consider and disclose climate risk.

This is perhaps unsurprising, given legal warnings that companies and their directors must consider climate change risks and disclose all material business risks.

But regulators are yet to clarify what specific climate-related disclosures are required of companies operating in even the most exposed sectors.

We need regulators to mandate a TCFD-compliant climate risk reporting for all companies operating in ‘high risk’ sectors, as well as financial institutions.

“Some climate risks are distinctly ‘financial’ in nature. Many of these risks are foreseeable, material and actionable now.”

Geoff Summerhayes, APRA Executive Board Member

Investor group action, but room for improvement

Investors are calling for robust climate risk disclosure from the markets they invest in. Over 150 financial institutions from around the world, representing around AU$100 trillion in investments, have publicly supported the TCFD reporting framework.

Over 250 institutional investors, managing over AU$35 trillion, are driving the Climate Action 100+ initiative. The project aims to “engage with the world’s largest corporate greenhouse gas emitters to improve governance on climate change, curb emissions and strengthen climate-related financial disclosures.”

The world’s biggest investor, BlackRock, has taken some small steps towards climate action. In December 2017 BlackRock sent letters to 120 companies, urging them to adopt the TCFD recommendations. Earlier last year, BlackRock voted in favour of shareholder resolutions calling for climate risk disclosure from Exxon Mobil and Occidental Petroleum. However, it must be noted that BlackRock’s efforts have been relatively minimal, with the investor having regularly failed to support other climate-related shareholder resolutions, not wielding its considerable power to shift recalcitrant companies.

The Exxon resolution was the first of its kind to pass, attracting 62% of the vote despite Exxon’s board recommending shareholders vote against it. In Australia, six shareholder resolutions calling for improved climate risk disclosure have been lodged since May 2017.

Clearly, investors are beginning to act on the massive threat climate change poses to the future viability of many companies. Universal, comprehensive and comparable climate risk disclosure can arm investors with the information they need to allocate capital in a way that drives the transition to a low carbon economy.

While these large scale investor groups are important, they cannot replace the need for individual investors to engage directly with the companies they own to ensure they are appropriately managing climate risk. Importantly, investor groups’ asks generally fall short of demanding companies operate in line with a Paris-aligned climate scenario.

“As institutional investors and consistent with our fiduciary duty to our beneficiaries, we will work with the companies in which we invest to ensure that they are minimising and disclosing the risks and maximizing the opportunities presented by climate change and climate policy.

– Global Investor Statement on Climate Change”