The corporate watchdog has launched a new surveillance program to ensure Australia's biggest companies are dealing with the risks of climate change.

Key points: ASIC has commenced surveillance of large listed companies to investigate how they are addressing climate change risk

ASIC has commenced surveillance of large listed companies to investigate how they are addressing climate change risk Former banking royal commissioner Kenneth Hayne warned last month that company directors faced court if they were negligent about climate change risks

Former banking royal commissioner Kenneth Hayne warned last month that company directors faced court if they were negligent about climate change risks Directors of government enterprises like the Murray-Darling Basin Authority face the same obligations to address risk

The move follows comments by former High Court judge and royal commissioner Kenneth Hayne that directors of companies could end up in court if they do not properly deal with the risk, as well as a new report from KPMG declaring climate change is the "new normal".

The Australian Securities and Investment Commission (ASIC) has started contacting large companies this week as part of its investigation into climate risk governance.

"We confirm we are undertaking this work but we do not, at this stage, intend to comment further on the nature of the surveillance work," a spokeswoman said.

It is likely to cover how companies are managing climate risks internally, as well as how transparent they are about these issues with investors.

A 2018 report by ASIC found company directors "should adopt a probative and proactive approach to emerging risks, including climate risk".

Only 14 per cent of annual reports ASIC reviewed in 2017 referenced key terms relating to climate change.

ASIC has already updated its guidance for companies about how to deal with climate change risk this year.

Pressure extends to government-appointed directors

The threat to directors being found negligent even applies to those on boards of government-owned businesses.

Defence Force Chief Angus Campbell prepared a speech for senior managers in government agencies at a retreat in June that noted that Australia is in "the most natural disaster-prone region in the world" and "climate change is predicted to make disasters more extreme and more common".

Defence Force Chief Angus Campbell believes climate change has the potential to exacerbate conflict. ( ABC News: Matt Roberts )

At the same retreat, legal advice was circulated detailing directors' obligations to address climate change risks, according to The Financial Review.

The advice, prepared by prominent barristers Noel Hutley SC and Sebastian Hartford-Davis, said "it is increasingly difficult in our view for directors of companies of scale to pretend that climate change will not intersect with the interests of their firms".

"In turn, that means that the exposure of individual directors to 'climate change litigation' is increasing, probably exponentially, with time."

Mr Hayne echoed this view at an event hosted by the Centre for Policy Development think tank in November, while also lashing out at political rhetoric.

"Learned helplessness and short-termism may explain how our political debates are being framed," he said.

"If they do, we must be careful that the framing of the political debates does not distract from what is clear: that directors have a duty to respond to climate‑related risks."

Government business enterprises such as the Northern Australia Infrastructure Fund (NAIF) and the Murray-Darling Basin Authority have already faced criticism in relation to climate change risk.

The Murray-Darling Basin Royal Commission found the original basin plan ignored potentially "catastrophic" risks of climate change.

In 2017 environmental lawyers warned directors of NAIF to not fund a railway linked to the Adani coal mine in central Queensland because it was in breach of their duties. NAIF has not funded the project.

ASIC is expected to reveal the findings of its investigation by July.

Climate change the 'new normal'

A report out on Wednesday from advisory firm KPMG noted that climate change is the "new normal", with global climate-related losses the fourth highest on record at $76 billion.

KPMG insurance partner Scott Guse told the ABC's AM program that, in addition to big super funds and central banks, general insurers are now factoring climate risk into their investment decisions more than ever.

"All the major insurers, as well as the Insurance Council of Australia, believe that climate change is present and it is certainly affecting the level and severity of catastrophic weather events that we're seeing across the Australian countryside," Mr Guse said.

"It is certainly on the forefront of all insurance companies' minds and it is certainly the new normal."

KPMG's link to climate risk comes as superannuation funds, the Reserve Bank of Australia, the Australian Securities & Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) demand greater disclosure and action on climate change.

Sorry, this audio has expired Climate change risk now the 'new normal,' warns advisory firm KPMG

Mr Guse said, in the face of current bushfires and dangerous smoke smothering Sydney, climate deniers need to face the facts.

"I think the research is pretty clear that we are seeing increasing temperatures year upon year and we are seeing the frequency and severity of weather events, which do occur from climate change, increasing," Mr Guse said.

"So, I think the statistics are there, front and centre, for everyone to see."