15 November 2018
It was a case of déjà vu this week, with two gas exploration companies almost reading from the same script as they responded to shareholder concerns about climate change resilience at separate annual general meetings (AGM).
Lakes Oil and Liquified Natural Gas Limited (LNG) are fossil fuel exploration companies listed on the Australian Securities Exchange. Victorian Lakes Oil is part-owned by infamous mining magnate Gina Rinehart, while LNG has its in home in Texas. Both companies have assets in Australia and USA.
Perhaps unsurprisingly, Lakes Oil’s & LNG’s annual reports make no mention of climate change or climate risk. This was echoed at each company’s AGM, with shareholders at both meetings seeking clarification as to whether climate change is considered a financial risk by the company.
“There is no material issue around climate that impacts on Lakes Oil,” Lakes Oil’s auditor from Pitcher Partners stated.
“Logically you’d understand it is not in production so climate risk is fairly minimal….Climate change isn’t material at the moment” was the response from LNG’s Ernst & Young auditor.
Research from Oil Change International concludes that ‘even if all coal mines were shut down tomorrow, the gas and oil in already-developed fields alone would take the world beyond the carbon budget for a 50% chance at staying below 1.5ºC of global warming’. If governments are serious about keeping global warming to below 1.5ºC, there is no room in the energy mix for new gas.
And if either Lakes Oil or LNG are unable to develop their gas fields, they both run the risks ending up with stranded assets.
Lakes Oil already knows exactly what this feels like; in September 2018 it lost a court case trying to recover AUD$2.6 billion in potential lost earnings because of a statewide fracking ban in Victoria.
When one shareholder at the Lakes Oil AGM asked the board what they had done specifically to educate themselves on climate risk over the last year, their response was telling.
“Well, we haven’t done anything specific in the company,” replied chairman Chris Tonkin. “As a company, we haven’t gone through an education process, whatever that might be.”
Shareholders also asked whether the company supports the Paris climate accord goal to limit global warming to well under 2ºC, as there is no mention in its published annual reports.
Lakes Oil’s board appear to believe that such goals are irrelevant to gas exploration. “We are not in production,” said Tonkin. “We take the Australian Government’s view, whatever that might be.”
LNG’s 2018 Annual Report mentions a range of programs and frameworks the company reviewed, including Task Force on Climate-related Financial Disclosures (TCFD) – a global framework developed to assist companies in disclosing financial risks the company is vulnerable to as a result of climate change.
The report states that most of the global programs, including the TCFD, had been deemed as not aligning closely with LNG’s activities. One shareholder probed this, asking “Why you have rejected the relevance of the TCFD?”
“At this point in time because we’re not producing, we’re not running facilities and producing emissions there is really very little to report against,”John Baguley, the Chief Operating Officer replied.
However, the TCFD guidelines show any fossil fuel company is at high risk, and identifying and reporting these risks is crucial even to companies who aren’t producing fuels.
Companies need to be made to disclose climate risk. Tell your super fund to enforce climate risk management.