Climate change will be an important policy issue at next year’s federal election  and boards will need to take action in order to keep up with the expectations of society, ASX director Sam Mostyn AO told a recent AICD livestream,COP26 and the climate challenge: what next for boards and business?

Mostyn, who sits on the boards of Mirvac, Transurban and Sydney Swans and chairs Citi Australia’s consumer bank, told an audience of 1600 that “this will be a federal election probably fought on climate issues”.

The Glasgow COP26 summit was significant because it highlighted the speed of change required and “massive transitions that are going on, including the transition of capital and the role of companies and the rising role of ESG environmental, social and governance principles that most directors now face”. Big commitments such as that of former Bank of England governor Mark Carney delivering $130 trillion worth of private capital commitments for decarbonisation “tells us that this was a big moment where everyone was stepping up to say that this is a moment to act”.

However, Australia was lagging behind other countries in the world on its official policy response and guidance on climate change, according to the panel.

Pollination Executive Director Zoe Whitton, who appeared with Mostyn on the LinkedIn Live video event, said Australia was “late to the party” in forging a policy response on the issue to guide business. There will be opportunities to develop new business models in the transition to a lower emissions pathway that businesses in other countries are currently in a better position to move early on.

“A lot of people are starting to see the opportunity here. And if you're in Europe, you are sitting in a world where there is a policy pathway that enables you to start investing in that opportunity to get things stood up,” said Whitton.

“If you're an Australian company, or an Australian director sitting in an environment where you can see those opportunities coming, the commercial risk is coming at you, but you don't have the policy support to enable you to act on those opportunities as clearly as you might otherwise like to do.”

Both Mostyn and Whitton welcomed the federal government’s announcement in November of net zero targets by 2050 and a plan to get 1.7 million electric vehicles  onto Australian roads by 2030. However they acknowledged that business was ahead of government in responding to the climate change crisis and that more commercial support was needed from the government.

“Paris (the Paris agreement treaty on climate change) is a room where the world's governments are negotiating the future and what the future is. And we have to make a decision whether or not we're in that room. We're presently not in the room,” said Whitton. “And we're definitely late to the party.”

The Glasgow Climate Pact reached agreements on climate action on international adaptation, mitigation and finance measures. It attracted some criticism that it did not go far enough.

The AICD will host a member complimentary webinar on 9 December: Insights on Climate Risk, Opportunity and Governance. You can register here.

What boards and directors can do

Mostyn urged boards and directors to follow the lead of the best performing companies on climate change and do the following things.

  1. Ask yourself, do you have a long term net zero commitment to honour before 2050? If that's not being discussed around your board tables, you probably should ask why.
  2. Adopt at least one medium term target that's appropriate and ambitious, which is relevant to the business that you're in. Look very deeply at how this affects your operational issues, but particularly the value chain.
  3. Look at what your customers saying about the expectations of you as a company in dealing with this this issue. And ask just how many emissions you have? It's not as easy as just saying we will be climate neutral. There needs to be a commitment as to how to get there.
  4. All boards should now have demonstrable, tangible near term actions that get us onto that pathway that say we understand where our business sits relative to the risk. And there is certainly a duty on all of us as directors to learn to understand the questions.