Santos rejects climate shareholder resolution
Tuesday 4 April, 2017: Environmental finance organisation Market Forces has expressed disappointment that Santos’ management has advised shareholders to reject a resolution calling on the company to acknowledge and assess the risks posed to its business by climate change.
The resolution would bring Santos in line with other Australian companies including Woodside, AGL and BHP Billiton, as well as international oil majors BP, Shell and Total.
It would also fulfill key requirements stipulated by the G20 Financial Stability Board’s Task Force on Climate Change-Related Disclosures, released in December last year.
“Many oil and gas majors around the world now understand that dramatic changes are taking place in the energy sector that represent a clear material financial risk,” said Market Forces Analyst Daniel Gocher.
“Investors are questioning why Santos appears to view itself as an exception. Particularly since the Australian Prudential Regulatory Authority (APRA) has made it clear that climate risks are “distinctly financial in nature”; and that many of these risks are “foreseeable, material and actionable now.”
According to Stuart Palmer, Head of Ethics Research at Australian Ethical, “Investors need clear, credible information about how corporate strategy is aligned – or not aligned – with the economic transition needed to meet the commitment by Australia and over 130 other countries to limit global warming to well below 2 degrees. This important shareholder resolution asks Santos to provide that clarity, to show how they are addressing climate risk and opportunity in their planning.”
Santos is Australia’s 19th largest carbon emitter, which could be much higher if fugitive methane emissions were correctly accounted for. Though it has reduced its breakeven oil price to US$36.50, the company is widely believed to be ‘in transition’ after booking more than US$4.4 billion in gross impairments in 2015 and 2016.
Greater climate risk disclosure will provide investors with the necessary information to adjudge the company’s prospects in the transition to a low carbon economy.
In line with recommendations from the Financial Stability Board’s Taskforce on Climate-related Financial Disclosure (TCFD), the resolution calls on Santos to:
- Incorporate climate-related risks and opportunities, and their impacts on its businesses, strategy and financial planning into mainstream financial reporting;
- Disclose the metrics and targets used to assess climate-related risks and opportunities;
- Provide further information on how its risk management framework influences capital investment decisions. Acquisitions and exploration expenditure should be weighed against the likelihood of assets becoming stranded before the end of their economic life;
- Provide more information to investors on the identification and assessment of climate-related risks;
- Disclose all political donations, and ensure consistency between the views of the organisation on climate change with those of industry bodies of which it is a member.
In 2016, more than 160 climate-related shareholder resolutions were filed in the United States and Europe, and similar numbers are expected this year.
View the investor briefing “Drilling Down: Why Santos must improve its Climate Related Financial Disclosures”