Climate is not a separate risk issue, new report shows

A leadership skills gap may be holding back Australian businesses from taking advantage of the opportunities of the climate crisis.

A new report by the Investor Group on Climate Change (IGCC) has suggested that Australian company directors lack the skills needed to support the transition to net-zero emissions by 2050.

“Climate change risk is still being seen by companies as a reputational or environmental risk and not as a significant business or investment risk,” lead researcher Ian Woods said.

Mr Woods’ analysis suggested that climate change is often siloed as a separate risk issue rather than being integrated into the overall company and risk management strategy.

“Assessing 15 Australian companies, we found that many companies identified the need for climate skills on their board, but few identified broader transition and disruption expertise, and none were comprehensively disclosing on board skill sets,” Mr Woods said.

According to him, it is difficult for investors to form a view on how prepared these companies are based on the current level of disclosure.

IGCC director of corporate engagement Laura Hillis said that many Australian companies are not delivering the progress needed to instill investor confidence when it comes to meeting the challenges of climate change.

“While promisingly, many of the companies assessed for this report have set net zero targets, it is unclear based on the findings of this report how prepared the boards of these companies are to lead the transition to net zero,” she said.

According to her, recent announcements made by the federal government represented a tipping point in the journey towards net zero. However, with that shift comes an escalation of risk.

“Boards that fail to recognise the risk of climate change and their role in driving the company transition to a low carbon business, will leave the company and investors exposed to unacceptable financial, strategic and market risks,” she warned.

Ms Hillis said that those who fail to meet the challenges of climate change and the transition to net zero will also miss out on the opportunities that come with decarbonisation.

“There are huge opportunities for Australian companies in the transition to net zero emissions. Investors want companies to capitalise on the transition, unlocking revenue and jobs for Australian communities,” she said.