AICD climate course recognised internationally | Key decisions needed at COP29

Global leaders are in the final week of COP29 negotiations in Baku, Azerbaijan, where progress has been slow on securing a critical climate finance deal. Discussions have taken place against a backdrop of uncertainty about the United States’ Paris Agreement commitments following the election of President-elect Donald Trump.

Meanwhile, attention is turning to the next round of national climate targets. Australia’s Climate Change Authority must provide advice to government on the country’s 2035 target by year-end, with media speculating that the government is unlikely to announce a target ahead of the upcoming federal election.

Also in this newsletter:

• ASIC maintains enforcement focus on greenwashing and ESG claims;
• Release of APRA climate vulnerability assessment results;
• AICD’s climate short course gains international approval; and
• Global emissions hit record high; new Future Fund investment mandate; activist litigation against Santos; plus more updates.

COP29: Attention begins to shift to 2035 country targets

Dubbed the ‘finance COP,’ this year’s annual climate negotiations are scheduled to end on Friday 22 November, with a global climate finance deal not yet sealed. Developing nations are calling for at least US$1 trillion annually to support emissions reductions and manage the impacts of extreme weather. Wealthier nations are yet to finalise their financial commitments. Australia has committed A$50 million for loss and damage from climate change to assist developing countries, with more countries expected to pledge in the final days of the talks. (For more information, including a post-event director briefing, visit the CGI event page.)

At the talks, the UK announced a target to reduce emissions by 81 per cent by 2035, compared to 1990 levels, encouraging others to set similarly ambitious goals. Brazil, host of the next climate negotiations, committed to cutting emissions by 59 to 67 per cent by 2035, against 2005 levels. Signatories to the Paris Agreement, including Australia, are required to submit updated nationally determined contributions (NDCs) by February 2025.

Regulators focus on greenwashing and climate risk

ASIC has released its enforcement focus for 2025, maintaining ‘greenwashing and misleading conduct involving ESG claims’ as a key priority. ASIC’s work will cover a broad range of sectors including listed companies, managed funds, and superannuation funds, focusing on claims that are inaccurate or made without reasonable grounds.

APRA’s second climate risk self-assessment survey examined how regulated entities identify, manage, and disclose climate risks while aligning with Prudential Practice Guide CPG 229. The survey invited all APRA-regulated banks, insurers, and superannuation trustees to participate, with responses received from over half of them. Findings include:

• Larger entities have improved their climate risk maturity since 2022, though one-quarter reported declines.
• The average level of climate risk maturity for large banks has improved since 2022, but results are broadly unchanged across large insurers and superannuation trustees which have lower levels. Smaller entities continue to lag in this area.
• Strengths include ‘governance and strategy’ as well as ‘risk management.’ Some entities are beginning to consider nature-related risks and transition plans.
• Almost all (97 per cent) of boards oversee climate risk, with most having regular oversight. Fewer than half of entities consider climate risk when appointing board members.
• Typically, more mature governance structures are found in entities where climate risk has been integrated into risk management processes.

Global carbon emissions hit record high, rising 0.8 per cent

The 2024 Global Carbon Budget projects fossil fuel emissions to reach a record 37.4 billion tonnes this year, a 0.8 per cent rise from 2023. Combined with deforestation and land-use emissions, total CO2 emissions are expected to reach 41.6 billion tonnes. In contrast, Intergovernmental Panel on Climate Change scenarios indicate emissions need to peak by 2025 and decrease by 43 per cent by 2030 to limit warming to around 1.5°C.

Separate reports show some regional reductions in greenhouse gas emissions. The EU's emissions fell by eight per cent last year. Australia's emissions data show a 0.6 per cent decrease in the year to March, compared to the previous year.

State of the Climate Report 2024

The Bureau of Meteorology and CSIRO have released the eighth State of the Climate report which highlights concerning shifts in Australia’s climate, including:

• A warming trend: Australia’s climate has warmed by 1.51°C since 1910, increasing extreme heat and intense rainfall.
• Rainfall: Southern regions have seen significant reductions in rainfall (16 per cent in the southwest and nine per cent in the southeast), while northern regions have seen increases.
• Fire and snow: Extreme fire weather days and longer fire seasons have risen since the 1950s, while snow depth and coverage in alpine regions have decreased.
• Oceans and coasts: Oceans around Australia are warming, acidifying, and rising, increasing the risks of marine heatwaves, coral bleaching, and coastal inundation.

The Climate Science Snapshot for Australian Directors, prepared in collaboration with the CSIRO, is currently being updated to reflect the report. 

Market developments update

• Future Fund’s new investment mandate: The federal government will direct the $230bn Future Fund to align its investments with ‘national priorities’, including Australia’s energy transition, housing supply, and infrastructure, in the first statement of expectations in 15 years. Future Fund chair Greg Combet said the board will ‘continue to make investment decisions independent of government with the priority of generating commercial returns’.
• Santos greenwashing case: The Australasian Centre for Corporate Responsibility alleges in the Federal Court that Santos breached corporate and consumer laws with misleading 'clean energy' claims in 2020 and 2021, and its net zero by 2040 plan. The AFR reports Peter Hearl, former chair of Santos’ Environment, Health, Safety, and Sustainability Committee, suggested defining terms in the draft climate report. The case returns to court in December.
• Australia’s rooftop solar installations reach four million: One in three homes now has panels, with a combined capacity of around 38 gigawatts.
• The ACSI Stewardship Report 2023-24 showed investor climate engagement over the past year centred on the credibility of climate targets and scenario analysis disclosure, with ‘Remuneration’ being the most discussed ESG topic with ASX 300 companies.
• Executive remuneration is also the focus of an Investor Group on Climate Change (IGCC) report into the unique challenge of integrating climate outcomes to incentivise action, with the best examples of climate incentives linked to the company’s climate strategy, time horizons, and weightings reflective of the materiality of the company’s climate risks.
• AICD’s Director Sentiment Index: The latest survey finds Climate change (33 per cent) remains the top long-term issue for directors followed by the ageing population (29 per cent) and productivity growth (28 per cent).
• AGM season: There has been a decline in climate-related questions at Australian AGMs compared to 2023, although a significant volume of questions was still about decarbonisation plans, climate disclosures, and the adequacy of companies' climate actions.
• Climate Action 100+ Net Zero Benchmark: The report shows progress in emissions intensity reduction but notes most companies are not yet on track for 1.5°C alignment. Most companies (133 out of 165) have a net zero target that covers at least their scope 1 and 2 emissions; 80 per cent are committed to implementing the recommendations of TCFD or International Sustainability Standards Board standards.
• Transition planning: The UK Transition Plan Taskforce released its final report in October 2024, offering a detailed framework to help organisations align operations with net zero transition plans. The IGCC has also issued a new guide, Investor Expectations for Corporate Just Transition Planning. Chapter Zero New Zealand has launched its first transition planning guide for directors.
• World Energy Outlook 2024: The IEA warns global clean energy investment must triple by 2030 to align with a 1.5°C pathway, but current growth is insufficient to meet this target.
• Biodiversity COP16: A permanent body for Indigenous Peoples and local communities was set up within the UN biodiversity process. Global biodiversity framework commitments increased by $163 million, though they fell short of expectations.
• Taskforce on Nature-related Financial Disclosures: 500 organisations are now committed to its nature-related risk management and corporate reporting framework. The TNFD has released a discussion paper on nature transition planning.

Upcoming AICD events and course

• 28 November 2024: Canberra Directors’ Download: The Circular Economy, 12:30pm AEDT. Register to attend.
• 4 December 2024: Sustainability Issues and Developments to Look Out For in 2025,12pm AEDT. Register now.
• 11–12 March 2025: Australian Governance Summit, Sydney, Tuesday–Wednesday, 9am to 5:00pm AEDT. Register now.
• Nature-Related Risk Assessment in Practice: How can boards get started? Access the recording.
• Introduction to Climate Governance: A self-paced, 2-hour e-learning module designed to introduce the climate literacy needed to navigate the complexities of climate change for your organisation. Complete the course today.
• Climate Governance for Australian Directors short course, first course delivery starts 8 January 2025; courses offered monthly. Book your place.