Companies increasingly need to understand climate change risks affecting their businesses if they wish to remain competitive, according to Governance Institute of Australia CEO Megan Motto.

“The Governance Institute’s Ethics Index for 2019 found that nine in 10 Australians wanted governments and organisations to take action on climate change.
 
“With stakeholders more focused than ever before on climate change and sustainability, organisations that fail to address these issues will find the market will pass them by,” Ms Motto said.

Recommendation 7.4 of the new ASX Corporate Governance Council’s Principles encourages entities for the first time to consider and report upon any material exposure to climate change risk.
 
To facilitate this, the Governance Institute of Australia today released Climate Change Risk Disclosure – a practical guide to managing climate risk.
 
Ms Motto said that “directors, governance and risk professionals, and C-suite executives have a responsibility to their shareholders, employees, and other stakeholders to know the risks their organisations face.

“Climate change risk needs to be given the same weight as other material business considerations and decisions, if companies are going to survive.
 
“Regulators and the broader community have identified climate risk as a growing area of concern, and company directors are likely to face increasing scrutiny of their decisions in the years ahead,” she observed.

Geoff Summerhayes – an APRA Executive Board Member and Chair of the UNEP Sustainable Insurance Forum – has welcomed the new guide as “a valuable tool that will support ASX listed entities and others in their management and public disclosure of climate risks.”

“Climate risk should be an integral part of business strategy and risk management frameworks,” he said.
 
According to the guide, these are some of the first steps to climate change risk reporting:

• Securing the support of your board of directors and executive leadership team.
• Integrating climate change into key governance processes, enhancing board-level oversight through audits and risk committees.
• Bringing together sustainability, governance, finance and compliance representatives to agree on roles.
• Examining the financial impacts of climate risk.

Download the guide at the Governance Institute of Australia website.

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