AICD survey: Climate the biggest issue for directors

A survey of directors found 77 per cent supported five-year targets to establish a pathway to carbon neutrality by 2050.

AICD chief executive Angus Armour. Picture: Britta Campion

Company directors have again zeroed in on climate change as the most pressing short and long-term issue for the federal government, as business sentiment climbed to its highest point in three years.

Despite Scott Morrison’s continuing reluctance to set targets for emissions reduction, 77 per cent of respondents to a survey by the Australian Institute of Company Directors supported clear, five-year targets to establish a pathway for the long-term objective of carbon neutrality by 2050.

Also, more than half said climate change was a material risk to their organisations.

AICD chief executive Angus Armour said directors clearly perceived that climate risk was not a “niche” issue only relevant to some sectors; it was a mainstream item on boardroom agendas.

“It is telling that despite Australia’s continuing COVID-19 challenges, including the vaccine rollout, border closures and lockdowns, as well as much worse conditions globally, directors continue to identify climate change as the top issue for the Australian government to address,” Mr Armour said.

At a global climate summit hosted by US President Joe Biden last week, the Prime Minister withstood pressure from the US to announce more ambitious decarbonisation targets.

Mr Morrison did not commit to net zero emissions by 2050, in line with the Paris Agreement, saying the objective was to “get there as soon as we possibly can, through technology that enables and transforms our industries”.

“Not taxes that eliminate them and the jobs and livelihoods they support and create, especially in our regions,” he said.

“For Australia, it is not a question of if, or even by when, for net zero, but importantly, how.”

More than 1500 directors were interviewed for the first Director Sentiment Index survey of 2021.

While the overall outlook from directors was positive, COVID-19 was seen as the ­nation’s main economic challenge, with 41 per cent listing the pandemic as a key challenge, followed by global economic uncertainty and climate change.

Mr Armour said the pandemic continued to affect Australia’s way of life, but the nation’s ability to control outbreaks compared to other countries was helping to improve sentiment.

“Significantly, the jump between sentiment at the last index, taken in September last year, and now, represents the largest movement, up or down, in the history of the index,” he said.

After a year of COVID-19, directors’ assessment of the current health of the domestic economy was positive, as was the outlook for the next 12 months.

Expectations for the Asian, Chinese, European and US economies were all more positive than pre-COVID conditions, but the outlook for the European economy was still more subdued.

The survey also revealed that the impact of COVID-19 was no longer the top issue “keeping directors awake at night”, falling from 68 per cent of responses a year ago to 24 per cent.

Sustainability and long-term growth prospects had taken over the top spot, with COVID-19 now in joint second place with cybercrime.

“Obviously the pandemic is still very much front of mind for directors, but instead of being all-consuming, they are now also ­focused on other risks,” Mr ­Armour said.

“It’s quite striking that COVID-19 is now on a par with cybercrime as an issue keeping ­directors awake at night, with ­experts attributing the rise in breaches to our work-from-home revolution.”

Among other key findings were that directors across all states were more positive about both the current and future economic outlook.

West Australian directors were the most positive about the economic outlook for their state in the next 12 months, followed by NSW, Tasmania and Victoria.

Only the Queensland and South Australian economies were viewed negatively over the next 12 months.

There was also a significant increase in directors expecting their business to grow in the coming year, from 42 per cent up to 62 per cent.