Climate change threats ignored as commercial focus shifts

The Climate Institute found falling concern about global warming has led to a drop in the proportion of companies assessing their vulnerability to climate change. The report says many firms view preparing long‑lived assets (like energy infrastructure and railways) as “expensive, extensive, time consuming and difficult,” so taking no action is often seen as the easiest path.

A reduced focus on climate risk can increase investment exposure to extreme weather and changing conditions. The Climate Institute warns past experience may no longer predict the future, and Munich Re data in the article shows Australia’s weather‑related losses rose more than fourfold between 1980 and 2011 — evidence that unmanaged climate risk can hit asset values and returns.

According to a report by Baker & McKenzie and the Asset Owners Disclosure Project (AODP) cited in the article, trustees responsible for Australia’s $1.4 trillion in superannuation who fail to consider climate change risk may be in breach of their fiduciary duties. The report highlights potential legal and accountability risks for trustees who ignore climate‑related threats.

The Baker & McKenzie and AODP report found a general reluctance by asset managers and fund managers to disclose the climate‑associated risks in their investment portfolios. That lack of transparency can make it harder for investors to understand how exposed their funds are to climate threats.

Munich Re, the world’s largest reinsurer, reported that Australia’s weather‑related losses increased more than fourfold over the 1980–2011 period. The article also notes Australia makes up less than 2% of the global reinsurance market yet accounted for more than 6% of global losses over the past five years, highlighting rising domestic exposure to extreme weather.

The article points to uncoordinated, state‑based land‑use planning policies for expected sea‑level rises and storm surges along Australia’s coastline. That patchwork approach can leave infrastructure and coastal assets subject to inconsistent planning and protection, increasing uncertainty and potential risk for investors in affected assets.

CSIRO surveys of more than 400 public and private organisations found the share taking account of climate risks fell from almost 60% in 2008 to less than 47% two years later. Of those that did assess risk, just over a third had taken steps or planned to act in response to their assessments.

Based on the issues raised in the article, everyday investors can start by reviewing their fund’s disclosures on climate risk, asking superannuation trustees or fund managers whether they assess and disclose climate‑related exposures (particularly for long‑lived assets), and monitoring reports from reputable sources like the Climate Institute, CSIRO or industry reinsurers that track weather‑related losses. The article highlights both gaps in disclosure and potential fiduciary duties, so scrutiny and questions to your fund are reasonable first steps.