16 November 2017
This morning at Seven Group Holdings (SGH) annual general meeting in Sydney, Chairman Kerry Matthew Stokes reaffirmed that the company does not consider ‘climate risk’ as a material business risk. This is despite the company’s massive exposure to the energy and sector through its subsidiary SGH Energy (100% owned) and 26% stake in major oil and gas producer Beach Energy. According to the IGCC (amongst others), oil and gas assets are exposed to climate-related financial risks, while the TCFD suggests Energy is one of the sectors with the “highest likelihood of climate-related financial implications.”
When a shareholder asked whether SGH’s external auditor, Deloitte, had considered risks associated with climate change when assessing the company’s financial statements, Mr. Stokes responded, “Certainly, the company does not define that risk, so it’s not quantified.” When the shareholder pressed specifically for the auditor to answer her question, the Deloitte representative confirmed that SGH had not disclosed any significant environmental liabilities in its financial statements.
TCFD not yet discussed at the board level
The Task Force on Climate Related Financial Disclosures (TCFD) outlines multiple climate-related risks to businesses like Seven Group Holdings, and recommends a robust framework for companies to measure and disclose their exposure to these risks. When a shareholder asked the board whether SGH was planning to implement the TCFD recommendations, Stokes admitted that it had not yet been considered at a board level, but would be ‘in the course of the next year.’ This is hardly reassuring for shareholders, given the TCFD produced draft recommendations a year ago, and its final recommendations were released back in June. The fact that SGH haven’t even discussed the issue, let alone decided how, or even if, the company plans to comply with the TCFD recommendations proves SGH is moving too slowly.
According to legal opinion by barrister Noel Hutley SC, company directors could be held liable for failing to properly consider and manage foreseeable climate-related risks to their business. Investors are wary and look forward to see if SGH delivers on its promise to consider climate related risks based on the TCFD recommendations in the forthcoming financial year.
Group’s carbon-intensive assets on the rise
Despite falling revenues from oil and gas sales in 2016 and 2017, and the desperate need for the world to shift away from dirty fossil fuels, SGH shows no signs of reducing the emissions intensity of its business mix. Beach Energy has increased its expected FY2018’s production by 150% after buying Origin Energy’s oil and gas exploration business Lattice Energy for $1.585 billion in September. Beach also plans to start drilling at its new gas project – Penola Trough in South Australia – next year.
The Penola project is supported by $6m funding from the South Australian Government through its PACE (Plan for Accelerating Exploration) grant scheme program. This is effectively using taxpayers’ money to subsidise exploration activities that threaten the future of our planet.
This article was co-written by Anthony Beshara and Munira Chowdhury