Directors, government and the community have been warned to urgently prioritise ambitious and coordinated action to address growing climate risks, with global focus on the issue at the United Nations Climate Action Summit in New York in September. The summit reflected the growing impact of climate change on business and investors, with a group of the world’s largest asset-owners — responsible for directing more than US$2 trillion in investments — committing to move to carbon-neutral investment portfolios by 2050. Sixty-five countries also committed to cut greenhouse gas emissions to net zero by 2050, and more than 100 business leaders announced actions to align with Paris Agreement targets to keep global warming “well below two degrees Celsius” and “make efforts” to keep it below 1.5ºC.
In September, the Intergovernmental Panel on Climate Change (IPCC) released its Special Report on the Ocean and Cryosphere in a Changing Climate, which highlighted the urgency of prioritising timely, ambitious and coordinated action to address unprecedented and enduring changes in the ocean and cryosphere. “We will only be able to keep global warming to well below 2°C above pre-industrial levels if we affect unprecedented transitions in all aspects of society, including energy, land and ecosystems, urban and infrastructure as well as industry,” said Debra Roberts, co-chair of an IPCC working group set up to assess the impact of climate change.
According to the non-profit Energy & Climate Intelligence Unit, more countries and organisations are making commitments to move to a net-zero emissions economy which will require fundamental changes in all sectors of the economy. Former Liberal party leader John Hewson AM, chair of the Business Council for Sustainable Development Australia, says it is time to establish a national policy to support business, government and the community in speeding up the transition to a lower carbon environment. “We need a framework, set out by an independent body... the longer you leave it, the harder it is to do,” he says .
In Australia, the Australian Securities and Investments Commission (ASIC) has recently updated its existing regulatory guidance to address the disclosure of climate change-related risks and opportunities. Among other updates, ASIC has highlighted that climate change is a systemic risk that could have a material impact on the future financial position, performance or prospects of entities, and may therefore need to be disclosed in an operating and financial review (a key part of reporting for listed entities). The updated guidance reflects an ongoing focus by regulators on climate change risk disclosures, and support for the use of appropriate disclosure frameworks, such as that developed by the Financial Stability Boards Taskforce on Climate-related Financial Disclosures (TCFD).
The issue was a hot topic at the AICD Essential Director Update in Sydney on 2 October. Lisa Chung, chair of Urbis, said different types of businesses had different considerations that sit along a spectrum. “It’s incumbent on boards to consider the different elements of climate change and how it impacts their business in the short, medium and longer-term.”