18 October 2018
Wildfires tore through the Napa Valley in October 2017, devastating the Californian wine industry. As the hills went up in flames, the estates owned and operated by Treasury Wine Estates (TWE) miraculously survived with only minor damage. The fires, widely linked to climate change, were a focus at the company’s annual general meeting (AGM) in Melbourne and Singapore today. The winemaker, responsible for favourite Australian drops such as Penfolds, Wolf Blass and Lindeman’s also admitted that it has not formally adopted, or agreed to, the Paris Climate Agreement.
The ASX100 listed company operates in a sector regarded as high risk when it comes to the financial impacts global warming will have upon its business. In its annual report, TWE states that climate change poses a material risk due to the effects it could have on grape supply, also recognising that it “presents a risk to business sustainability, particularly in relation to regulatory changes and the impact of changing climatic conditions on our vineyards.” Given these risks, you’d expect that the company would at least agree with the Paris climate goals.
The Napa Valley and its climactic shift illustrate the kind of changing conditions that could occur globally. The Scientific American calls this the new norm for California, with fires of greater intensity expected. The increased frequency of similar extreme weather events has been linked by scientists to climate change.
Having escaped any serious fire damage to its wineries, TWE was asked if it had estimated the financial impacts of extreme weather events and how much addressing these climate related risks would cost. The company said it was looking into estimating these risks.
TWE acknowledges both the transitional and physical risks posed by climate change to the business, so why has it done so little? Considering a year ago some of TWE’s most important North American assets were at the mercy of wildfires, it’s puzzling that they haven’t developed any long-term strategy. A shareholder asked if the winemaker planned to stress-test its financial resilience under different global warming scenarios and release this analysis. Paul Rayner couldn’t give a clear time-frame, only pledging to do so at some point in the future. Watch the video:
It would be a shame for shareholders and wine lovers alike if TWE didn’t get its act together in time. One of TWE’s goals outlined in its corporate responsibility report is ‘climate action’. Real climate action includes publicly adopting the goals of the Paris Climate Agreement and releasing scenario analysis to shareholders.