Climate change activism entering a new era

Chanticleer understands that when the Centre for Policy Development held a private session in Melbourne in 2017 to talk about Hutley’s opinion, directors’ duties and climate-related risks there was a forthright and somewhat controversial intervention by a former High Court judge.

The judge said that if he were forced to decide on this sort of matter he would probably take a a harder line in relation to directors’ duties than the one presented by Hutley. He appeared to reject the concept of shareholder primacy.

The way Chanticleer sees it, directors are facing a pincer movement that will ensure they cannot avoid boardroom discussion of climate change risks, which will inevitably lead to formal legal opinions being sought.

The pincer

One side of the pincer takes the form of activist shareholder groups such asClimate Action 100+, which includes AustralianSuperand many other industry super funds and retail funds. About 290 investors from 29 countries with $30 trillion in assets under management are signatories to its climate change governance agenda.

Glencore bowed to pressure from this group.

The other side of the pincer takes the form of regulators, which are becoming increasingly vocal and working to co-ordinate their efforts to bring pressure to bear on boards of directors.

It is possible to date the global regulatory activism on the need for directors to consider the risks of climate change to a speech given by Bank of England governor Mark Carney in 2015.

He warned that investors faced huge losses from climate change because reserves of oil, coal and gas could become “literally unburnable”.

“The challenges currently posed by climate change pale in significance compared with what might come,” he said. “Once climate change becomes a defining issue for financial stability, it may already be too late.”

In Australia the two regulatory thought leaders on climate change risks are Geoff Summerhayes, an executive board member at the Australian Prudential Regulation Authority, and John Price at the Australian Securities and Investments Commission.

Important for financial viability

On Friday in London, Summerhayes, who is chairman of the UN Sustainable Insurance Forum, made a speech on the need for greater disclosure of climate change risks by all financial institutions.

He says disclosure of climate change risks will be important for determining the financial viability of institutions.

“Early movers are also prescient enough to understand that regulators’ current stance of merely encouraging climate-risk disclosure will inevitable harden towards making such disclosure mandatory,” he said.

Australia’s regulators showed how seriously the take climate change risk when the Council of Financial Regulators formed a climate change working group which includes representatives from APRA, ASIC, the Reserve Bank of Australia and Treasury.

In November the RBA joined the Network of Central Banks and Supervisors for Greening the Financial System, which starts from the premise that climate-related risks are a source of financial risk.

Those closely watching the response of regulators to climate change are keenly awaiting a speech next month by RBA deputy governor Guy Debelle, who is speaking at an event in Sydney.

But Ingrid Holmes, who was a member of the EU High-Level Expert Group on Sustainable Finance, tells Chanticleer that regulators cannot create the sort of momentum needed for more rapid action by corporations.

She says this will require government involvement which is unlikely to happen under the Morrison led coalition. Nevertheless, Holmes says that on a trip to Sydney and Melbourne this month she was impressed with the high level of awareness of climate change risks and the appetite to do something about it.


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