Governance

Since 2018 the Australian Securities and Investments Commission (ASIC) which regulates listed companies has required companies to report on climate risks and opportunities as part of their overall risk reporting.  This has been a major focus of their work in 2022.  You can read a simple outline of their approach in this Commissioners Update from October 2021

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A more detailed outline of ASIC’s approach is contained in ASIC’s Climate risk disclosure by Australia’s listed companies,  published in September 2018.  It identifies two sorts of climate risks – Transition Risks, created by the transition to a low-carbon economy (for instance, the need to exit fossil fuel production and use, the need to develop new processes, etc), and Physical Risks generated by climate change (for instance, more frequent and intense extreme weather, sea level rise).  Their survey of Australia’s top 300 ASX listed companies revealed that a substantial proportion of boards and CEOs were attuned to climate issues, but that there were fragmented and inconsistent disclosure practices, with disclosure taking place in different ways and covering different issues.  They recommend an approach covering four key aspects of the question

• Considering climate risk as a integral aspect of risk planning

• Strong and effective corporate governance to oversee management of reporting against these risks

• Compliance with the law

• Disclosure of useful information to investors, to allow them to make informed investment decisions.

 

This guidance is focused on large listed companies.  However, the same general principles apply to all incorporated bodies including housing organisations.  The Australian Institute of Company Directors has been working on governance issues for directors more generally, and has produced a Climate Risk Governance Guide in partnership with Minter Ellison.  This guide introduces the reasons climate change is an issue for companies, and provides a set of five steps for companies to address the issue:

• Where are we at now – board, management, company structures

• Appropriate governance structures

• Strategy and risk oversight

• Accountability and disclosure

• Reflecting on your progress.

 

It also discusses the duties and expectations of directors.  It discusses the impact of climate change under a number of headings.

• The best interests of the company – directors need to consider how climate change impacts on the company’s interests – viewing the environment within a broad definition of ‘stakeholders’.

• Due care and diligence – directors are obliged to take account of both the risks and opportunities they are facing, and climate change is likely to fall into one or both of these categories.

• Disclosure – Directors are obliged to report accurately to shareholders/members and regulators about their risk strategies and about the impacts of key events on them, and this can include those related to climate.

• Heightened regulatory and stakeholder expectations – directors need to be aware both that corporate regulators have an increased awareness of the potential impacts of climate change on companies, and that stakeholders have higher expectations of how companies will respond to this challenge.

• Litigation risks – if an organisations knowingly exposes stakeholders to climate risk, they may be liable for the outcomes.

 

One of the things we note about these documents is that risk features heavily in the advice and analysis.  Although ‘opportunities’ are mentioned, most of the attention is focused on what could go wrong.  This is certainly not to be dismissed – climate change poses a huge risk to all of us.  However, as social purpose organisations we may also wish to consider our ethical and social obligations to contribute in a positive way to building the zero-carbon world we will need to halt ongoing change. 

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The section of this website on Adaptation deals with the risk side of this equation.  The sections on the building process, energy efficient homes and clean energy talk about the opportunities to reduce the carbon footprint of houses.  The other pages in this Governance and Management section deal with ways to reduce impacts from your operations.