Australia’s 300 largest public companies will need to deal with climate change ‘as a matter of priority’ or risk losing institutional investors

Sediment from the agriculture sector flows onto the Barrier Reef hurting the coral. (Jonas Gratzer, LightRocket via Getty Images)
  • Australia’s largest companies will be required to be transparent about how they are managing climate change or risk losing institutional support, the Investor Group on Climate Change (IGCC) say.
  • Along with other investor representatives, the group is pushing to have mandatory reporting requirements for the entire ASX 300 within three years, as other nations have already done.
  • The groups say it must be a ‘priority’ in order to manage investment risks, climate risks and maintain financial stability.
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Australia’s most valuable listed companies will be unable to ignore climate risks any longer, under a new push to tie future funding to action.

Australian institutional investors, represented by the Investor Group on Climate Change (IGCC), are calling time on the country’s biggest businesses, claiming Australia is being left behind while other markets like the United Kingdom, New Zealand, and Hong Kong forge forward.

The group says few of the ASX’s biggest companies have been transparent in how they plan to deal with the rising threat of climate change, putting both their businesses and investors’ money at risk.

Under a new plan unveiled on Tuesday, the IGCC says the ASX 300 will all be mandated to report their climate plans and progress under a single consistent framework within the next three years.

PRI, the organisation which lays out the global principles for responsible investment, says corporate Australia won’t transition to net-zero emissions if it is allowed to pick and choose what it tells the public.

“A lot has been achieved through voluntary climate risk disclosure, however this system is reaching the limits of what it can deliver, and significant gaps remain,” CEO Fiona Reynolds said.

“Establishing a mandatory regime would provide much needed clarity for companies and financial organisations, while at the same time ensuring Australian regulators and governments will have the data they need to maintain the stability of the Australian financial system in the face of growing and more frequent shocks from worsening climate change.”

The PRI, along with not-for-profit CDP and IGCC, work with global investors controlling hundreds of trillions of the global capital. IGCC counts more than 100 investors among its members including $8 trillion fund manager Blackrock and AustralianSuper, Australia’s largest retirement fund.

The triumvirate says that the market will need full oversight over where businesses stand in order to decide whether or not they fund projects. As a result, investors will increasingly be divesting away from laggards and reallocating towards those who are straight with them.

So too is it now incumbent on financial regulators like APRA and ASIC along with the Treasury and the ASX to make sure companies are managing “the inevitable and rising risks caused by the climate emergency”.

“To ensure the ongoing stability of the financial system and to remain competitive with global counterparts, Australia should be developing its own mandatory regime as a matter of priority,” IDP CEO Paul Simpson said.

APRA appears to be listening, urging businesses and Australian banks to act now in the face of “unprecedented risks”.

Failure to do will cost more than a few bucks.