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The corporate watchdog has launched a new surveillance program to ensure Australia's biggest companies are dealing with the risks of climate change.
Key points:
- ASIC has commenced surveillance of large listed companies to investigate how they are addressing climate change risk
- Former banking royal commissioner Kenneth Hayne warned last month that company directors faced court if they were negligent about climate change risks
- Directors of government enterprises like the Murray-Darling Basin Authority face the same obligations to address risk
The move follows comments by former High Court judge and royal commissioner Kenneth Hayne that directors of companies could end up in court if they do not properly deal with the risk.
The Australian Securities and Investment Commission (ASIC) has started contacting large companies this week as part of its investigation into climate risk governance.
"We confirm we are undertaking this work but we do not, at this stage, intend to comment further on the nature of the surveillance work," a spokeswoman said.
It is likely to cover how companies are managing climate risks internally, as well as how transparent they are about these issues with investors.
A 2018 report by ASIC found company directors "should adopt a probative and proactive approach to emerging risks, including climate risk".
Only 14 per cent of annual reports ASIC reviewed in 2017 referenced key terms relating to climate change.
ASIC has already updated its guidance for companies about how to deal with climate change risk this year.
Pressure extends to government-appointed directors
The threat to directors being found negligent even applies to those on boards of government-owned businesses.
Defence Force Chief Angus Campbell prepared a speech for senior managers in government agencies at a retreat in June that noted that Australia is in "the most natural disaster-prone region in the world" and "climate change is predicted to make disasters more extreme and more common".
At the same retreat, legal advice was circulated detailing directors' obligations to address climate change risks, according to The Financial Review.
The advice, prepared by prominent barristers Noel Hutley SC and Sebastian Hartford-Davis, said "it is increasingly difficult in our view for directors of companies of scale to pretend that climate change will not intersect with the interests of their firms".
"In turn, that means that the exposure of individual directors to 'climate change litigation' is increasing, probably exponentially, with time."
Mr Hayne echoed this view at an event hosted by the Centre for Policy Development think tank in November, while also lashing out at political rhetoric.
"Learned helplessness and short-termism may explain how our political debates are being framed," he said.
"If they do, we must be careful that the framing of the political debates does not distract from what is clear: that directors have a duty to respond to climate‑related risks."
Government business enterprises such as the Northern Australia Infrastructure Fund (NAIF) and the Murray-Darling Basin Authority have already faced criticism in relation to climate change risk.
The Murray-Darling Basin Royal Commission found the original basin plan ignored potentially "catastrophic" risks of climate change.
In 2017 environmental lawyers warned directors of NAIF to not fund a railway linked to the Adani coal mine in central Queensland because it was in breach of their duties. NAIF has not funded the project.
ASIC is expected to reveal the findings of its investigation by July.
Topics: government-and-politics, company-news, climate-change, australia
First posted