Listed companies more at ease with carbon pricing

Australia's biggest companies are increasingly comfortable with carbon pricing, although three major firms – Arrium, David Jones and Origin Energy – still insist its risks are high.

The largest listed companies in Australia and New Zealand are increasingly comfortable with carbon pricing and are taking action on the implementation of energy efficiency opportunities at an even greater rate and scale than 2011. Of continuing concern though is the low number of companies in high emitting sectors with carbon emission reduction targets.

These were some of the key findings of the  Carbon Disclosure Project (‘CDP’) Australia and New Zealand (‘NZ’) Climate Change Report 2012, which was written by Deloitte Australia. The report also found that Australian banks and property companies continue to outperform on climate change disclosure and performance, and that many Australian airlines and retailers made significant improvements in their climate change disclosures in 2012.

This report provides an annual assessment of climate change disclosures made by the top 200 listed companies on the Australian Securities Exchange (‘ASX200’), and the top 50 companies on the New Zealand Exchange (‘NZX50’) through the CDP.

CDP is an international, not-for-profit organisation providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CDP collects information from companies on their greenhouse gas emissions and assessment of climate change and water risk and opportunity on behalf of 655 institutional investors with assets of US$78 trillion.

In total, 50% of ASX200 companies, and 71% of ASX100 companies, responded to CDP’s 2012 investor request for climate change information. These responding companies represented 85% of the total market capitalisation of the ASX200.

ASX200 and NZX50 companies are increasingly comfortable with carbon pricing

The number of ASX responding companies identifying risks from carbon pricing fell 12% on last year. Only 3% of ASX200 responding companies rated the risks associated with carbon pricing as high, and these were the same three companies as last year – Arrium (formerly OneSteel), David Jones and Origin Energy.

Whilst many companies were aware of the potential for carbon pricing to increase operational costs, 35% also indicated that carbon pricing could create new business opportunities.

Few utilities, materials or energy companies are setting carbon emission reduction targets

Of continuing concern is the low number of ASX200 and NZX50 companies in these high emitting sectors with absolute and/ or intensity carbon emission reduction targets. Taking into account the non-responders to CDP’s climate change information request, 92% of Utilities companies, 82% of Energy companies and 87% of Materials companies did not have any GHG emission reduction targets.

This general level of unresponsiveness to greenhouse gas emissions management is problematic and demonstrates a continued lack of preparedness to respond to carbon pricing and economy wide emission reduction targets.

Targets are a clear first step for many companies to implement emission reduction activities. Another recent global report by CDP - Carbon reductions generate positive ROI - found that companies with targets invested 1.1% of capital expenditure on emissions reduction activities – more than ten times that of companies without targets (0.08%) – and achieved year-over-year absolute reductions in CO2e of more than double the rate of companies without targets.

More Industrials companies are setting carbon emission reduction targets

Encouragingly, the Industrials sector has demonstrated a step change in the number of companies disclosing targets since 2011, with an increase of 28% up to 67% of responding companies. Industrials companies reporting absolute emission reduction targets through CDP this year included: Leighton Holdings, Transurban Group and Virgin Australia Holdings.

Action on energy efficiency by many companies may not be particularly strategic

60% of emission reduction activities reported by companies were energy efficiency initiatives. This was a 10% increase on 2011 numbers and a possible indication that rising electricity prices are making investments in energy efficiency increasingly viable.

While 80% of responding companies had at least one active emissions reduction initiative in the reporting year, less than half (48%) had a formal emissions reduction target. This may indicate that many companies are not yet taking a strategic approach to carbon management, and this may possibly be contributing to delayed action and unnecessarily high costs.

Australian banks and property companies continue to outperform on climate change disclosure and performance

Banks and property companies continue to dominate CDP’s 2012 ASX200 and NZX50 Carbon Disclosure Leadership Indexes (CDLI) and Carbon Performance Leadership Indexes (CPLI), possibly a result of their increased focus on climate change associated with concern over reputation and customer expectations.

Five Financials companies were included on both the CDP 2012 ASX200 CDLI and the CDP 2012 ASX200 CPLI. These companies were: Commonwealth Property Office Fund, CFS Retail Property Trust, Mirvac, National Australia Bank and Insurance Australia. Qantas Airways and Commonwealth Property Office Fund were the equal highest scoring companies on the CDP 2012 ASX200 CDLI.

The outperformance of the ASX200 Financials sector on climate change disclosure is unusual by international standards as companies from the Financials sector are often under-represented in other CDP leadership indices.

Many Australian airlines and retailers significantly improved their climate change disclosures in 2012

Qantas Airways achieved the equal highest carbon disclosure score across the ASX200 and NZX50. Virgin Australia Holdings achieved membership of the ASX200 CDLI for the first time after a very significant improvement in its disclosure score.

A number of large Australian retailers also made noticeable improvements in the quality of their climate change disclosures through CDP in 2012, including: David Jones, Metcash, Wesfarmers and Woolworths.


A summary of emissions data from all ASX200 and NZX50 companies responding to CDP in 2012 can be found in the appendix of the report.

Individual public company responses to CDP can be downloaded from www.cdproject.net

James Day is Director – Australia and NZ, Carbon Disclosure Project.

CDP is an international, not-for-profit organisation providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CDP collects information from companies on their greenhouse gas emissions and assessment of climate change and water risk and opportunity on behalf of 655 institutional investors with assets of US$78 trillion.