Kenneth Hayne's climate rebuke 'unfair'

Australia's biggest pure-play coal miner Yancoal is considering adopting the Financial Stability Board's (FSB) climate disclosure guidelines and believes it was unfair for former high court judge Kenneth Hayne to accuse company directors ards of "learned helplessness" on the business risks of climate change.

Mr Hayne was reported in The Australian Financial Review on Monday,  saying company directors who fail to act on climate risk would be neglecting their legal duties and could end up in court.

He urged boards to adopt the FSB's Taskforce on Climate-related Financial Disclosures (TCFD), which sets out clear climate risk disclosure guidelines.

Responding to Mr Hayne's remarks, Tim Poole, chairman of rail freight company Aurizon, called on the federal government to do more to tackle climate change, saying firmer emissions targets would take some of the emotion out of the debate and curb community concerns.

Angus Armour, chief executive of the Australian Institute of Company Directors, said while it was clear that the community was concerned about climate change, it was for company boards to judge the best way to act.

Yancoal said it was doing enough to assess the risks posed to its business by the shift toward cleaner forms of energy, despite the fact it has not yet adopted the guidelines proposed by the TCFD and also does not report the 'Scope 3'' emissions of its customers.

''We continue to consider the potential risks and opportunities posed to our business and the broader sector as a result of an anticipated global shift towards a lower-carbon economy in the medium to long term,'' a Yancoal spokesman said.

Following Whitehaven

If Yancoal does adopt the TCFD guidelines it would follow rival Australian coal miner Whitehaven, which publicly reported against the guidelines for the first time in its 2019 sustainability report.

"Governments and industry should be coming up with plans to move to lower or net-zero carbon emissions over time," he said.

Aurizon, which hauls coal for mines on thousands of kilometres of rail, doesn't have its own target for net-zero carbon emissions.

The company has come under pressure from activists opposed to Adani's Carmichael coal mine not to provide services to the Indian company but is legally obliged to provide access to its rail network if asked.

"Governments and industry should be coming up with plans to move to lower or net-zero carbon emissions over time," Mr Poole said.

Mr Armour said it was clear that boards need to determine what they judge are the implications of climate change for their company.

He said directors "need to articulate the implications and their response to shareholders and stakeholders alike, in the interests of sustaining investor and community support for their company".

The AICD includes climate risk in its directors' course and has expressed support for the TCFD.

Climate related disclosure

The Financial Review contacted numerous companies and industry groups in a range of industries to get their response to Mr Hayne's comments.  Qantas, NAB Westpac and QBE pointed to their earlier statements on climate change.

A Suncorp spokesman said: "Suncorp accepts the international scientific consensus on climate change and acknowledges that directors have a duty to consider and act on climate risk."

A spokesman for insurer IAG said the company had set out its response to climate risk in a climate action plan.

"This is supported by a scorecard that includes group executive team accountability and six-monthly scorecard updates that are published on our website. IAG’s Climate Action Plan is supplemented by climate-related disclosure.

"As part of our ongoing focus on climate action and disclosure over the last 15 years, we have been addressing many aspects of the TCFD guidelines in various reporting, including disclosure on governance, strategy, risk Management and Metrics and Targets."

A Virgin Australia spokeswoman said the airline took its role in addressing climate change "extremely seriously".

"This year, we published our Climate Risk Report, in line with the recommendations of the TCFD. This report outlines our identification and management of key climate-related risks, including the impact on our business and as a business."

In step with legal opinion

Sarah Barker, head of climate risk governance at law firm Minter Ellison, said Mr Hayne's views were in step with the mainstream of legal opinion.

"The potential for climate change to be litigated as a financial risk issue was something that we first flagged in our work more than five years ago, in our work with the UN Principles of Responsible Investment."

She said the Hutley opinion, which argued boards have a legal obligation to consider climate risk, was now more than three years old.

"Mr Hayne’s comments are wholly consistent with opinions expressed by ASIC, APRA and the RBA over the last 24 months. So it seems pretty clear that this is reflective of a mainstream interpretation of the law," she said.

Ms Barker said directors used to take the view that environmental action would necessarily be to the detriment of wealth maximisation.

"Whereas now in the modern economy that historical assumption just doesn’t hold true.”

She said it would affect many more industries than the obvious ones, such as coal miners, energy companies and insurers.

"The unique characteristic of climate change is that the potential for material impacts are not confined to only one or two sectors of the economy. So it might be that companies involved in the plastics sector might have greater exposure to economic transition risk, whereas companies involved in infrastructure may be more concerned with physical risks.

“This is an issue that is of increasing concern, not only to activist shareholders, but for mainstream investors and market regulators. It would be ill-advised for any director to dismiss the potential for a claim in this area as being remote. The law is clear, and stakeholder expectations are only increasing," she said.