Managing for climate risk

Climate risk is an emerging requirement of corporate governance and has the potential to impact access to capital and markets. Recently the financial regulator APRA stated that climate risks will be an important and explicit part of our thinking.

On April 5-6 the Profitable Dairying project convened a symposium on climate risk – “Understanding climate risk, legal responsibilities and potential impacts on access to capital and markets for dairy businesses” ('Profitable dairying in a carbon constrained future forum' - final program).

Leading experts presented on how banks, agribusiness, investors and climate risk experts are addressing these challenges as they relate to agriculture.

Key messages from the experts

  • We are currently living through unprecedented times of change (technological, society, economic and climate).

  • Global action on climate change (Paris Agreement and Task Force on Climate Related Disclosures) will have implications for sustainability and emissions reductions in the short term. Focus will be on a zero carbon economy, not a low carbon economy transition.

  • Management of climate risk will increasingly be an emerging requirement of corporate governance, access to capital and access to markets for the dairy sector. Consequently, climate risk needs to be considered like any other material risk to companies/enterprises.

  • Corporates are more influential in driving the agenda with respect to climate risk than governments

  • Climate risk includes both exposure to climate change (acute and chronic physical impacts), as well as the transitional costs (financial and legal requirements) to a zero carbon economy.

  • Directors have a duty to consider climate risk. Fiduciary duties report notes that the risk has to only be foreseeable, not probable, for directors to have a responsibility to act.

  • A company needs to know how to mitigate against the physical and transitional climate shocks. 

  • The 2040 scenarios for physical changes to climate are happening now in some regions. Adaptation is not an optional add-on for businesses – it should be a fundamental part of business planning. Adaptation is about changing what we do (tactics/strategies) to get the outcome we want (values/result).

Program and presentations

Below is a compilation of the presentations made at the event.

Elisa de Wit
Norton Rose Fulbright 
Positioning the dairy industry for a carbon constrained world 
Tom Quinn
Future Business Council 
Directors duties and climate change 
Mark Howden
ANU Climate Change Institute 
Climate adaptation risks and opportunities
Emma Herd
Investor Group on Climate Change 
Understanding the investor perspective
Bob Welsh
Kilter Rural 
Attracting impact investors - Dairy transformation as part of the climate change solution 
Martin Newnham
How managing for climate meets investor needs and opportunities
Peter Castellas
Carbon Market Institute 
Investing in carbon markets in a post-Paris world
Gioia Small
Treasury Wine Estate 
Integrating climate change risk and opportunity into business decisions - a practical view 

Relevant reports

Below is a compilation of the relevant reports presented at the event.

Australian policy

Review of climate change policies - cover small  Review of climate change policies – Discussion paper (2017) Dept of Environment The Government is seeking comment on its climate change policies – due by 5 May 2017.

For more information on the review click here (external link).
 Independent review into the future security - cover small Independent Review into the Future Security of the National Electricity Market (2016) Dr Alan Finkel Dr Alan Finkel presented the preliminary report of the Review to the Council of Australian Governments (COAG) Leaders’ Meeting on 9 December 2016. The Final Report will be submitted to the Council of Australian Governments by the middle of 2017.

For more information on this review click here (external link). 
 Australias climate policy - the emerging patchwork - cover small
Australia’s climate policy: The emerging patchwork (2017) Norton Rose Fulbright  The report provides an insight into the current status of State/Territory policy and legislative regimes with respect to emissions reduction, renewable energy and energy efficiency. It also provides an indication of the investment settings operating/developing as we move towards 2020 and the commencement of Australia’s formal obligations under the Paris Agreement.

For further information on the report click here (external link). 
 Australian climate policy survey 2016 - cover small Australian Climate Policy Survey (2016) Carbon Market Institute  This report outlines research that has uncovered a number of interesting insights into how business views the existing federal policy suite, and the need to connect with international markets as they develop.

For further information on the report click here (external link). 

Legal opinion

 The Centre for Policy Development and Future Business Council - cover small Legal Opinion: Fiduciary Duties & Climate Change (2016) Future Business Council & Centre for Policy Development  Mr Noel Hutley SC was commissioned by FBC/CPD to develop this legal opinion. It emphasises that as the economic and environmental implications of climate change intersect, company directors are legally empowered to elevate climate-related risks and opportunities to the forefront of corporate strategy.

For further information on the report click here (external link). 

 Climate change in Australia

 State of the climate 2016 - cover small State of the climate 2016 (2016) CSIRO and BoM  This fourth, biennial State of the Climate report draws on the latest monitoring, science and projection information to describe variability and changes in Australia’s climate, and how it is likely to change in the future.

For further information on the report click here (external link). 
 Garnaut climate change review - cover small Garnaut Climate Change Review – 2011 Update (2011) Ross Garnaut  In November 2010, Ross Garnaut was commissioned by the Australian Government to provide an independent update to his 2008 Climate Change Review. Professor Garnaut's book, The Garnaut Review 2011: Australia in the Global Response to Climate Change, is the final report of the update.

For further information on the report click here (external link). 

Investors and climate change

 From risk to return - cover small From Risk to Return: Investing in climate change adaptation (2017) Investor Group on Climate Change  This report looks at how do we increase the amount of investment going into adaptation solutions? What works? What lessons can we learn from other areas of investment activity and what steps can be taken to increase capital.

For further information on the report click here (external link). 
 Investors got the signal - cover small Investors got the signal- Actions in 2016 since the Paris Agreement (2016) IGCC
This report outlines the key 2016 highlights of actions taken by investors who are part of four major investor groups, who collaborate collectively as part of the Global Investor Coalition on Climate Change.

For further information on the report click here (external link).
 The next boom - cover small The Next Boom (2015) Future Business Council  FBC has tracked the performance of leading sustainable goods and services since the turn of the century. We found compelling evidence that sustainability should not be seen as a cost, but a business opportunity.

For further information on the report click here (external link).