Two-thirds of Australia’s largest companies are owning up to material climate risk but only a third have put a dollar figure on exposure.
The few big firms that have crunched the numbers suggest global temperature rise and decarbonisation will have a material impact on cash flows and earnings.
The $2.5-4.5 billion in annualised climate-related financial risk estimated by corporates so far is just the tip of the iceberg, says ERM, the sustainability consultancy behind the analysis.
“In these this first year of reporting, it’s not a mandatory requirement to quantify climate risk,” ERM lead partner corporate sustainability Mary Stewart told AAP.
“But if they have a material risk, shouldn’t they be quantifying it already?”
The analysis covers the first batch of climate disclosures since it was made mandatory last year, a move designed to put reporting obligations on par with traditional financials.
Little or no capital was flowing into areas of concern, and few companies were embedding climate risk into business decision-making through executive renumeration or other means.
Transition plans were also few and far between, and most companies had put off scope three reporting, referring to indirect emissions generated across entire supply chains.
“The gap between identified climate risk and capital deployed to address it is stark,” Dr Stewart said.
Australian businesses were also grappling with an energy supply crunch and broader economic strain caused by conflict in the Middle East but now was not the time to delay climate investment, she added.
Companies taking steps to insulate from climate risk were in a more resilient position, she said.
“These reports give us an indication of how ready all of the companies are for the coming transition and physical impacts of climate.
“But it also gives you a sense of just how resilient the company is to significant upheaval.”
Energy and mining companies were found to be leading on climate risk management, while financial services firms lagged.
The big end of town have been the first to report under the mandatory scheme and smaller firms will be phased in over coming years.
Companies can be exposed to both physical risks, such as flooded factories, and transition risks, such as higher costs from emissions regulation or pricing.
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