Wed. Dec 1st, 2021

Australia's largest companies are lagging behind in ESG reporting, as investors demand climate responsibility
Photo: Getty
  • About 62% of ASX200 companies failed to disclose the details of their ESG commitments during the last year.
  • New research suggests that investor expectations continue to surpass the efforts of Australia’s largest companies in the midst of expectations and a broader democratization of stock trading.
  • Only 36% of ASX200 companies have a net zero target, while only 4% have CO2-negative plans or targets.
  • Visit Business Insider Australia’s website for more stories.

The nation’s largest listed companies go to great lengths to be transparent about their environmental, social and managerial commitments, although many still do not have approved action plans and the majority do not even make their strategies publicly available.

Analysis of Australia’s ASX200 companies by consultancy firm PwC shows that while 87% of the top 200 companies carried out “meaningful ESG reporting” over the last year, an increase of 29% over the previous year, as many as 62 % of them failed to make details related to their “short, medium and long term goals” publicly available.

Matthew Lunn, ESG assurance lead at PwC Australia, said the Australian market has seen remarkable cosmetic improvements but critical areas continue to disappear.

“We are witnessing a huge investor-driven demand for information about a company’s commitment to ESG activities, providing a significant opportunity to impress capital markets and reap the benefits of doing so by clearly demonstrating goals and commitments,” Lunn said.

“But even though we have seen improvements in 2021, there is a long way to go again. A strategy without a plan, a time frame and measurable goals to be held accountable to is not a strategy, but merely a statement of ambition.

“Short-, medium- and long-term plans are necessary to ensure progress in a company’s ESG strategies with goals and KPIs to make progress measurable.”

PwC found that only 36% of ASX200 companies have some expression of a net zero target, while only 4% have talked about CO2-negative plans and targets.

Meanwhile, around 66% of these companies have not externally secured their ESG reporting, leaving no way to know if commitments can be met at all.

The company’s study showed that despite the limited ESG efforts launched by Australia’s largest companies, investors’ expectations continue to exceed them. PwC puts it down to three factors.

First, that global crises such as the pandemic and climate change have spurred new stakeholder demands as investors’ “expectations and education” expand.

The firm also proposes that ESG reporting standards continue to change, leading to constant challenges for large companies, while capital providers require more information to meet ESG-driven investment mandates.

“With stakeholders being more adapted than ever to the effects of climate change, companies have had to step up their response,” Lunn said.

“Increased stakeholder activism has meant that companies making such revelations must be prepared to back them up with genuine plans to achieve their stated goals – and be careful about how they label their activities or products as clean or green.”

Those who do, and fail to follow their commitments, run the risk of being laundered, Lunn said. In Australia, the accusation has come with consequences that go far beyond missed investment opportunities.

The Commonwealth Bank of Australia became one of the earliest case studies after one of its shareholders in August tried to sue the bank in an attempt to see documents detailing decisions to finance oil and gas projects that were claimed could fall into place. contrary to the Paris Agreement. .

The case, which was launched in the Australian Federal Court, marked the first for climate legislation in Australia, and came just weeks after the CBA published an updated climate plan in its annual report backing previous commitments.

Listed companies have faced a cacophony of new pressure as retail investment platforms such as Superhero in Australia and Robinhood in the US have democratized stock trading and welcomed dozens of communities into the investment world, just as crypto exchanges did before them.

With the new demographics, there has been a greater expectation for ESG reporting and action on a new subgroup of topics. Lunn said ASX200 companies could meet some of these expectations if they went a little further than the base level required of them.

“There is an important demarcation between reporting ESG information and executing on an integrated ESG strategy,” Lunn said.

“While there is a breadth of publicly reported information in the ASX200, there is still a great opportunity for companies to integrate more robust ESG strategies into their business,” he said.

“The key is to engage with stakeholders and properly understand the issues that are important to them – and reflect on how those stakeholders’ priorities and goals drive the ESG strategy.

Businesses cannot do that, Lunn said, without a proper ESG management infrastructure in place.

“With complex and rapidly changing topics under the ESG banner, boards need to regularly assess whether their members are adequately adept at navigating these issues,” Lunn said.

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