ASIC, Australia’s corporate regulator, released a report into climate risk disclosure by listed Australian companies.
They are not great. While 40% of ASX100 companies (based on a sample of 20) made some form of disclosure about material climate change risks in an appropriate place — the Operating and Financial Report — only 1 in 20 of the sample from the ASX100–200 did the same. And the quality of those disclosures is so poor as to be almost useless. For example:
“A recurring observation from our entity-level surveillance was the absence of any broadly consistent approach to defining climate risk or classifying its component parts. It was often difficult to discern whether general references to climate change risk related to physical or transition climate risks or both.”
Others, says ASIC, combined their “risk disclosures” with things like their policy position statements on climate change:
“In some of these instances, we found it difficult to clearly identify the actual risks to the relevant company’s business model, strategy and prospects from the broader climate-change-related background information.”
From poring over sustainability reports, CDP filings, etc over the last 4–5 years, I am not surprised. The difference between “transition” and “physical” risks are like the difference between say, diet and weather…they may be connected, but they are utterly different in characteristics, drivers, analytics and impacts.
If the benchmark continues to be so low that merely mentioning the words “climate” gets you over the line, it’s hard to see how any of it will lead to markets truly pricing in climate risks — and that was the objective of the Financial Staiblity Board’s Taskforce on Climate-Related Financial Disclosures (TCFD), which much of this builds upon.