11 November 2019
Whitebark Energy’s shortcomings on climate risk disclosure and management were top of the agenda for shareholders attending the oil and gas company’s AGM in Perth today.
Whitebark Energy owns oil and gas exploration and production assets in Canada and Western Australia, so is entirely reliant on future demand for oil and gas remaining strong. However, holding global warming to 1.5°C will require rapid reductions in the use of these fossil fuels.
So it was unsurprising that climate change, the energy transition required to mitigate its impacts, and the risks this poses to Whitebark dominated today’s shareholders meeting.
According to the Australian Accounting Board’s December 2018 Bulletin ‘Climate-related and other emerging risks disclosures,’ climate risks should be disclosed if investors could reasonably expect that these risks would have a significant impact on the entity.
Despite this guidance, Whitebark’s 2019 Annual Report failed to include any information on the risks that oil and gas demand could fall in response to market and regulatory shifts to meet the climate goals of the Paris Agreement. The word “climate” was not mentioned at all.
In response to shareholder questioning, Whitebark’s auditor, KPMG, said it had taken climate change risks into account when reviewing the financial statements. However, this consideration had stopped short of stress testing Whitebark’s forecast oil and gas prices against any scenarios consistent with the Paris Agreement’s goals of holding global warming to well-below 2°C and pursuing efforts to limit warming to 1.5°C.
Instead, the auditors apply a ‘consensus approach,’ essentially comparing Whitebark’s price forecasts to industry peers. This process does nothing to ensure Whitebark is appropriately considering and managing the risk that its markets may rapidly decline as a result of climate action.
This was further demonstrated by Managing Director David Messina’s comment: “In the medium term, oil demand and gas demand will increase. There’s no question.”
Clearly Messina hasn’t read the IPCC’s Special Report on Global Warming of 1.5°C, which demonstrates that oil and gas use for primary energy must fall globally by 37% and 25% respectively by 2030.
Morgan went on to accuse those concerned about climate change of “generating misleading emotional headlines.”
With Whitebark failing to inform shareholders about the financial risks posed by a Paris-aligned transition away from oil and gas, perhaps the company should be more concerned about whether it is being misleading.