Investment analysts have uncovered what they say is a “significant gap” between the climate commitments of major Australian companies and how they actually spend their money.
A report from climate consultancy group Pollination included analysis of the public climate disclosures of 12 major Australian companies, looking especially at their decisions on how and where to spend capital.
“What we’ve found is a significant gap between ambition and action,” said Richard Proudlove, the director of corporate engagement at the Investor Group on Climate Change, which commissioned the research. IGCC’s members manage some $35tn of assets globally.
Proudlove said the report was the first “deep dive” on whether Australian companies “are actually backing their net zero commitments with real investment”.
The companies analysed were AGL, BHP, BlueScope Steel, Dyno Nobel, Orica, Qantas, Origin, Rio Tinto, Santos, South32, Woodside and Woolworths.
All those companies have been targeted for engagement by investors as part of a project called Climate Action 100+.
But the report does not single out individual companies, or name which companies had performed better than others.
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Researchers at Pollination assessed companies against eight criteria related to capital investment, and found only one “achieved high alignment” in more than half the criteria.
For example, one criteria asked whether a company was moving capital away from fossil fuels. A company with no policy to phase out the use of oil, gas and coal and no meaningful cuts in investments would have “low alignment”.
A company with public commitments on fossil fuels, and that had cut fossil fuel spending and quantified the financial implications of those decisions, was in “high alignment”.
Only three out of eight applicable companies on that question were in “high alignment”, with three assessed as being in “low alignment”.
The report, called Financing Australia’s Corporate Climate Transition, also describes a framework and set of guiding principles for companies on how they source, manage and spend capital.
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Zoe Whitton, the managing director at Pollination Group, said: “Companies are announcing capital expenditure numbers, but our analysis shows these disclosures don’t provide enough detail for investors to assess whether the capital is sufficient or appropriately targeted to achieve their stated decarbonisation goals.”
The Australian government is expected to announce its 2035 emissions reduction target by September, and is also working on detailed plans to reduce emissions across six different industry sectors.
Whitton said: “Without clear policy frameworks like sectoral pathways, companies lack the guidance they need for effective capital allocation, and investors can’t properly evaluate their transition strategies.”
Proudlove said the level of ambition articulated in the government’s plans and in the target would influence the capital investment decisions of many Australian companies.
“We’re in a year where the Australian government needs to ratchet up its [climate goals] with a 2035 target. It’s important that’s an ambitious target.
“The detail in those [industry sector] plans and the ambition of the climate targets is an essential signal for investors and companies to commit.”
