Net-zero doubles for top 200 firms, but investors want more detail

Pressure has been increasing on companies globally to improve climate reporting standards. Last year, the International Sustainability Standards Board was launched at the United Nations Climate Change Conference (COP26). The board aims to produce the new global standard to replace a confusing mixture of disclosure practices that some companies use to assess the impact of climate change.

In March, the US Securities and Exchange Commission announced a plan to require publicly listed companies to disclose climate-related risks to their business.

The proposal draws from the approach of the Task Force on Climate-Related Financial Disclosure (TCFD), an international framework used by thousands of companies in 92 countries with a combined market capitalisation of $27.2 trillion.

ACSI’s report found 103 companies in the ASX 200 are adopting and disclosing against this framework, compared with 11 companies in 2017 when it was created.

Davidson said TCFD reporting was the global standard, and the council wants it to be mandatory in Australia, to make it easier for investors to assess the merits of a company’s disclosures.

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She also said there was a growing expectation from investors and stakeholders that companies should have decarbonisation targets that are aligned with the Paris Agreement goal to limit global warming to 1.5 degrees, rather than just holding it to well below 2 degrees.

“I think investors expect all companies should be stress-testing their business against a 1.5 degrees scenario … and yet we found that only a small number, I think about just under 40 companies, were using that model. From our perspective, that means that their stress-testing is inadequate if it’s not looking at 1.5 degrees,” she said.

Transition in an Australian context also needed a lot of focus, Davidson said.

“We’re seeing international companies reporting at much higher levels of detail on how they are going about that process than we are yet seeing in Australia.”

ACSI did not single out poor-performing companies in the report, but Davidson said they will be engaging with those that need to improve.

“This is an economic reality now. Nobody’s saying, ‘I believe in climate change, or I don’t believe in climate change anymore’. This is now economic reality and companies that failed to grapple with it will not survive.”

In Australia, regulators have shown increasing interest in ESG-related disclosures by fund managers and companies, warning that those falsely promoting their green credentials – “greenwashing” – will face an enforcement crackdown.

On Friday, the Australasian Centre for Corporate Responsibility accused gas and oil producer Woodside of overstating greenhouse gas emissions, enabling it to claim reductions that did not exist, for its proposal to extend the North West Shelf project until 2070.