6 March 2017
Market Forces and over 100 individual shareholders have filed a resolution with the oil and gas major, Santos, demanding the company acknowledge and assess the risks posed to its business by climate change. The resolution is the first attempt to enforce the Financial Stability Board’s Task Force on Climate Change-Related Disclosures, released in December.
Announced to the ASX today, the resolution will be put to a shareholder vote at Santos’ annual general meeting (AGM), due to be held on Wednesday 4 May. The vote will provide an important opportunity for Australia’s asset management sector, including our massive superannuation industry, to walk the walk when it comes to managing climate change and its associated risks.
Santos is Australia’s 19th largest carbon emitter, and could be much higher on that list 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.
Despite former CEO David Knox signing on to a joint business CEO statement in support of the Paris negotiations in late 2015, the company has failed to follow through with action to bring its business into line with the Paris Agreement’s aims.
The company’s plans to expand coal seam gas fields in projects such as Narrabri are clearly at odds with its pledge to support policy to keep the world well below two degrees of warming.
Only last month, the Australian Prudential Regulatory Authority (APRA) reiterated that climate risks are “distinctly financial in nature”; and that many of these risks are “foreseeable, material and actionable now.” Investors are calling on Santos’ board to move from platitudes and bring the company in line with now widely-established business practices on climate change.
APRA’s recent warning builds on a legal opinion released in late 2016 by Noel Hutley SC, which states that company directors who don’t properly consider climate related risks could be personally liable for breaching their duty of due care and diligence.
In 2016, more than 160 climate-related shareholder resolutions were filed in the United States and Europe, and similar numbers are expected this year. Australian investors have discussed the issue of climate change with companies for many years, yet only AGL Energy and BHP Billiton have disclosed scenario analyses – the cornerstone of the TCFD recommendations. Boards have had plenty of time to consider the risks, now is the time to act.