Investor group finds most companies dismissing climate as a financial risk to their business, in breach of legal requirements

More than a dozen of Australia’s largest mining and infrastructure companies may be in breach of their legal duties by refusing to consider the financial risks posed by climate change, an investor action group says.

In September, the Australian Securities and Investments Commission published a report that said “the law requires” relevant companies to “include a discussion of climate risk” in their annual report.

Market Forces, a group that advocates for environmentally sustainable investment, assisted shareholders at company annual general meetings. Almost all of those companies ignored or dismissed climate change as a financial risk to their business.

“Directors are legally required to consider climate risk. Failure to do so may constitute a breach of their legal duties,” Market Forces campaigner Rachel Deans said.

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“It appears directors are openly admitting to breaking the law at their shareholder meetings and Asic seems to be well aware of it.”



At the Prairie Mining AGM, chairman Ian Middlemas was asked whether the board supported the Paris agreement targets. “It’s not on our radar,” he said.

“I think they are the sort of questions that are for people that are producing product and have got an actual operation. We’re just simply exploring.



“So I’m not sure ... just trying to think of what’s a good example … it’s like if you have a toddler at home and someone asks which university will he go to, well the answer is ‘we will work it out when he is 18’.



“I’d love us to be in a position where we have to have an idea about climate change, and an idea about Paris you know … what you just raised. But it’s sort of like having an idea of what happens in Sydney when you live in Perth.”

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When asked whether Senex Energy followed a 2C or 3C climate increase target, the company’s chairman Trevor Bourne said: “We don’t operate our company on either.



“Whether it is two or three [degrees] that is a bigger issue for the government to address. If they get off their backside and do something about it, it would make our investment decisions much clearer.”

In September Asic audited 60 companies and found only 10 identified climate as a material risk.

Among the findings of that report was that companies were legally bound to “include a discussion of climate risk when it could affect the entity’s achievement of its financial performance or disclosed outcomes”.

“Directors should also consider the requirement to include any relevant analytical comments and specify how risk factors that are within the control of management will be managed.”



A legal opinion, written for the Centre for Policy Development, warned of potential consequences for a lack of disclosure.

“It is likely only a matter of time before we see litigation against a director who has failed to perceive, disclose or take steps in relation to a foreseeable climate-related risk that can be demonstrated to have caused harm to a company,” the opinion said.

Deans said it was not just a legal requirement, but also a responsible business practice.

“Shareholders are frustrated that companies are not looking at the financial risks climate change poses to their business,” she said. “It is likely we will see more cases of directors being sued if they don’t start taking climate risk seriously.”



