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How are we accounting for climate-related risks?

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Theo Comino
03 December 2018

What is the Task Force on Climate-Related Disclosures?


In 2015 during the climate negotiations in Paris, Mark Carney, Governor of the Bank of England and Michael Bloomberg, former Mayor of New York, announced the creation of a new task force, which would help investors understand their financial exposure to climate risk and help companies disclose this information in a clear and consistent way.

The Task Force for Climate-Related Disclosures (TCFD) has developed a voluntary framework for companies to disclose climate-related information in their financial filings. Following the release of the draft report in December 2016, the Task Force received more than 300 responses from respondents in 30 countries and worked to address the key issues raised. With the final report and recommendations released in July 2017.


How Australian businesses are reacting


In the year since the issuance of the TCFD’s Recommendations on Climate-related Financial Disclosures, many Australian businesses have either wholly or partially adopted the framework. However, the level of adoption remains low.

The 2018 Climate Risk Disclosure Barometer published by EY reported that the coverage of the Recommendations across all sectors was moderate (51%) and the quality of the disclosures remained low (25%).

What is AGL doing?


AGL believes that the TCFD framework enables market participants to disclose clear, comparable, and consistent information about the risks, and responsibilities associated with climate change. This will assist AGL’s investors, lenders, insurers, and other stakeholders to better understand how AGL is managing this issue.

As Market Forces have reported in its analysis of ASX100 companies reporting against the TCFD, only three companies have disclosed in line will all the recommendations. These being South32, AGL Energy and Stockland. AGL is proud to be a leader in this field.

AGL’s TCFD disclosure for FY18 combines previously disclosed work on scenario analysis along with additional discussion of the key risks and opportunities in a way that follows the key recommendations of the TCFD.

The disclosure was published in August 2018 and covers the following key points:

  • AGL’s strategy on climate change. Outlining AGL’s views on Australia’s energy market transformation and the ways in which AGL is positioned to ensure the company’s long-term sustainability. This section also elaborates AGL’s approach to scenario analysis.
  • AGL’s approach to corporate governance over climate-related financial risk, including Board, Committee, and management oversight.
  • Material risks and opportunities to AGL’s business. While AGL anticipates some financial implications from the physical risks associated with climate change, it is the transitional risks associated with Australia’s energy market transformation and transition to a low-carbon economy that present the most material risks to AGL’s business.
  • AGL’s key metrics and targets on climate change including its greenhouse gas footprints, thermal generational closure program, and emissions intensity target.

To read more about AGL’s approach to climate-related financial risk, please read our report ‘Powering a Climate Resilient Economy’.

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