Australia’s top carbon emitting companies are making progress towards transitioning to net zero emissions but failing to back up their decarbonisation plans with capital, a big global investor initiative has found.
An annual benchmark of 14 of the country’s biggest ASX listed companies undertaken by Climate Action 100+, a worldwide coalition of 700 investors responsible for $US68 trillion ($107 trillion) in assets under management, found most companies’ actions remain well short of the Paris Agreement goal of keeping global warming to 1.5 degrees.
Companies are failing to back up their decarbonisation plans with capital, a big global investor initiative has found.Credit: The Age
The benchmark found many major emitters are only just beginning to grapple with their indirect Scope 3 emissions, which are produced in the consumption or use of a company’s goods or services.
Climate 100+’s benchmark, released annually since 2021, is calculated using existing disclosures made by publicly listed companies about their climate targets, governance, net zero emission plans and climate-related financial disclosures. It aims to increase transparency for investors about climate-related risks and create long-term shareholder value.
Big super funds including AustralianSuper and HESTA are associated with Climate 100+ and use the benchmark to assess their investments in companies like mining giants BHP and Rio Tinto, supermarket behemoth Woolworths, Qantas Airways, and oil and gas producers Santos and Woodside, among others.
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“Across the board, we’re seeing good progress across all sectors in terms of specific targets and detail around climate-related disclosures and plans. Although, there’s a lot more to do in terms of actually making those plans happen,” said Richard Proudlove, director of corporate engagement with the Investor Group on Climate Change which coordinates the Climate 100+ initiative.
Andrew Gray, AustralianSuper’s head of ESG (environmental, social and governance) and stewardship investments, said the benchmark was useful for its consistent assessment of the globe’s largest carbon-emitting firms.
“The benchmarking assessments provide a valuable resource for investors in their stewardship roles, enabling more structured climate change-related engagements with companies and importantly a way to measure the progress that companies are making,” he said.
Woolworths said that the benchmark outlined aspirational ambitions. No company globally had met their entire criteria last year and the supermarket giant was the only retailer in Australia with highly complex supply chains who was on the list, a spokesperson said.
“We’ve set ambitious climate commitments, including removing more carbon from the atmosphere than we produce by 2050, and we are moving at pace, having already cut our emissions by more than 36 per cent since 2015,” they said.
Proudlove said where companies are failing is in the lack of detail they provide investors about how they are funding their decarbonisation commitments and factoring climate risk into their capital allocation. This is a major indicator of inaction, according to the benchmark.
He said only a few of the 14 companies – Origin, AGL and BHP – are providing investors with adequate Scope 3 targets and informing them of the methods they use to calculate emissions from the products they sell, which often represent the greatest risk for their net zero ambitions.
“Typically, companies are really at the beginning of understanding the magnitude of those emissions,” he said. “Investors have gone from ensuring that companies are committed to decarbonising, to now getting in the weeds on exactly how they do it.”
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Other concerns highlighted include companies not planning for the impact decarbonisation will have on their workers and communities, and not actively lobbying for government policies that will help them to decarbonise quickly. Those without a clear path to net zero, like the oil and gas sector, are still using industry bodies to push against policies that will allow the whole economy to transition to net zero, he said.
Climate change and energy minister Chris Bowen said in July that the Climate Change Authority was developing transition plans for key sectors of the economy – electricity and energy, industry, built environment, agriculture and land, transport, and resources – that will aid companies to hit net zero emissions.
“They will have to be credible, decision-useful, and comprehensive enough to give companies and investors the certainty they need to make capital allocation decisions in line with Australia’s emission reduction targets and the internationally agreed targets in the Paris Agreement,” Proudlove said.