Climate Action 100+ demands action from Australian business

Funds representing more than $US35 trillion want action from Australia’s largest companies.

Investment funds representing more than $US35 trillion ($52.2 trillion) have warned Australia’s largest companies will be held to account on climate change, as they use their clout to demand action from businesses including BHP, Rio Tinto and Wesfarmers.

The global cohort of investors, which includes Australia’s largest super funds, has warned business leaders must do more to mitigate climate change investment risk and cautioned on the threat posed by industry associations whose climate views are inconsistent with the companies they represent.

Funds and other industry players have also called out policy uncertainty on climate change as one of the challenges facing corporate Australia, just days after Prime Minister Scott Morrison hit back at critics, saying Australia had “nothing to apologise for over climate change”.

“One of our roles as investors is to use our influence to improve company behaviour for the purpose of managing the investment risk in climate change,” AustralianSuper head of economic, social and governance issues, Andrew Gray, told The Australian.

“The momentum [from engaging with companies] has been great. But much more still needs to be done,” he said.

The $170bn AustralianSuper said it looks for boards to demonstrate appropriate oversight on climate change risks and the skills to manage them. “Accordingly, director voting must inevitably consider climate change risk management as an integral role of the board at companies where this is a material business issue,” Mr Gray said.

Climate Action 100+, an investor-led initiative formed to pressure the world’s largest corporate greenhouse gas emitters to take more action on climate change, in its inaugural progress report released on Wednesday, revealed that of 161 target companies — 13 of which are Australian — 70 per cent have set long-term emissions reduction targets but just 9 per cent have emissions targets in line with or better than the minimum goal outlined in the Paris Agreement that seeks to keep the rise in global temperatures to below 2 degrees Celsius.

The 13 Australian companies targeted by the global network are Adelaide Brighton, AGL Energy, BHP, BlueScope Steel, Boral, Origin Energy, Qantas Airways, Rio Tinto, Santos, South32, Wesfarmers, Woodside Petroleum and Woolworths.

The group of investors, boasting more than $US35 trillion in assets under management and including Australian super funds such HESTA, UniSuper, QSuper and First State Super.

Climate Action 100+ praised companies that it said have shown “first-wave leadership”, including BHP, which has committed to net-zero emissions by the middle of the century and in July said it would develop technologies to reduce emissions from its own operations as well as those generated from the use of its resources, also known as scope 3 emissions.

The miner has come under renewed pressure in recent weeks over its memberships with industry associations such as the Minerals Council of Australia. Shareholders last month put forward a resolution, to be voted on at its upcoming annual general meeting, calling for it to suspend such memberships, with activists claiming the lobby groups undermine the goals of the Paris Agreement. BHP has since confirmed it is reviewing these memberships.

The Climate Action report showed that although 77 per cent of companies have clear board responsibility for climate, less than 8 per cent have alignment between the lobbying undertaken by their industry associations and their stated policy position.

“If a company has a position on climate change, and the industry association they’re a member of is inconsistent with that position, that actually creates an investment and business risk because the industry association is not necessarily advocating for what the company themselves sees as important,” Mr Gray said.

His comments were echoed by Emma Herd, chief executive of Investor Group on Climate Change, who said lobbying was “a key issue of concern”.

“There’s been a lot of frustrations from investors around our inability to get resolution on climate policy. And a lot of scrutiny around the role that industry associations are playing in that discussion and a lot of discussion with companies on how they are communicating to their industry associations what their expectations are,” Ms Herd told The Australian.

AustralianSuper has not yet decided how it will vote at the BHP AGM, Mr Gray said, but it was “actively considering all the issues around it”.

“This particular resolution is asking for BHP to suspend its membership of those industry associations. So the question is, is that actually the right action that we want to take? … Alternatively, we might actually prefer that a company like BHP has a seat at the table of those industry associations, and uses that to influence movement.”

Unisuper ESG analyst Sybil Dixon said companies were getting the message on climate change action but added that policy certainty would help to set a clear direction.

“The aims of the Paris agreement are quite clear. The Australian government has signed up to those aims and the longer we put off trying to come to a clear action the more difficult it makes it,” she said.

Meanwhile, chief executive of the $51bn HESTA super fund, Debby Blakey, said the fund had engaged with companies to seek improved disclosure, Paris-aligned target setting, and the linking of targets to executive remuneration.

“Few global companies are yet to set Paris-aligned targets and investors want to see targets set and clear pathways to progress so they can price climate risk and allocate capital accordingly.

“There are a few Australian companies who are leading in this but across the market much work still needs to be done,” she said.