Join our daily newsletter At The Bell to receive exclusive market insights
- Australian company directors lack the skills and experience to lead the corporate transition to net zero emissions, says the Investor Group on Climate Change’s new report
- “Based on current disclosure it is hard for investors to form a view on how prepared these boards are for the transition,” Ian Woods, the report’s lead researcher says
- The report said investors want climate change fully to be integrated into the company strategy and executive remuneration reflective of the company’s climate change targets
- Earlier this month, the Australian chapter of the Climate Governance Initiative joined directors in calling on boards to put climate transition at the centre of company strategy
According to the Investor Group on Climate Change’s new report, Australian company directors lack the skills and experience to lead the corporate transition to net zero emissions.
The study, which looked at fifteen of Australia’s most carbon-intensive firms, outlines investor expectations of corporate boards and management in terms of climate change risk, especially for companies that are highly exposed to climate-related transition risks.
“Climate change risk is still being seen by companies as a reputational or environmental risk and not as a significant business or investment risk,” Ian Woods, the report’s lead researcher and author said.
“Assessing fifteen Australian companies, we found that many companies identified the need for climate skills on their board, but few identified broader transition and disruption expertise, and none were comprehensively disclosing on board skill sets.
“Based on current disclosure it is hard for investors to form a view on how prepared these boards are for the transition,” the Investor Group on Climate Change co-founder said.
The report said investors want climate change fully to be integrated into the company strategy, board members to be equipped with the skills to deal with climate change and executive remuneration reflective of the company’s climate change targets.
It comes as the International Financial Reporting Standards Foundation (IRFS) announced the formation of a new International Sustainability Standards Board (ISSB) at the COP26 summit in Glasgow.
The new guidance aims to provide global financial markets with high-quality disclosure on climate and other sustainability issues.
It also follows a KPMG Australia analysis of corporate reports last month which found ASX200 corporations still have a lot of work to do on climate impact reporting.
Earlier this month, the Australian chapter of the Climate Governance Initiative joined worldwide directors in calling on boards to put climate transition at the centre of company strategy.
The statement urges directors to “…engage with the impacts of climate change, guide long-term plans and translate these into immediate, practical action”.
Climate change has remained a top issue for Australian directors, according to the AICD’s Director Sentiment Index, with directors naming climate change action as a top short and long-term policy priority for the Federal Government.
“Climate risk is no longer an issue facing select sectors, but a standing item on many board agendas,” Austral Institute of Company Directors CEO and Managing Director, Angus Armour said.
“Climate change is now, and will remain, a critical concern for generations of Australian directors. Boards should be looking at both the risks as well as the opportunities facing their organisations.”
