Nature Positive Summit insights | Big corporates scale back targets

This month, Australia hosted the inaugural Global Nature Positive Summit in Sydney with the Minister for the Environment and Water stating, “like the transition to net zero, we can’t achieve nature positive without business.” Ahead of the Summit, the AICD and ten other Australian business, finance, investor and civil society groups released a Joint Statement on Nature aiming to raise corporate awareness of issues including reliance on nature for economic growth and the concerning rate of environmental decline.

Also in this newsletter:

• AICD releases updated mandatory climate reporting guide for directors.
• BP scales back net zero targets.
• Market update: Record greenwashing penalty for Vanguard; Investors back down on BHP climate protest vote; New York Climate Week highlights; ICA explores nature positive insurance; ‘Nature negative’ government subsidies; and other international developments.

Key takeaways for directors from the Global Nature Positive Summit

Last week, the inaugural Global Nature Positive Summit (Summit) brought together leaders from government, civil society, First Nations and business to drive private investment in nature repair and reverse biodiversity loss. The UN Secretary General emphasised in a message at the Summit the need for humanity to “make peace with nature”. For insights for directors from the Summit, see our article.

Key takeaways included:

• To meet climate goals, businesses should adopt nature-based solutions that address environmental concerns while driving innovation and economic growth.
• With rising pressure from international investors and regulators, businesses must adapt to increased expectations for action on nature and biodiversity - these expectations are essential for remaining competitive in a global market that increasingly prioritises nature and biodiversity.
• The Summit highlighted the importance of Indigenous expertise in biodiversity stewardship. Recognising and integrating Indigenous perspectives can enhance ecosystem management and is essential for achieving global sustainability goals.

The Taskforce on Nature-related Financial Disclosures (TNFD) announced that 23 Australian organisations had committed to voluntary reporting of their nature-related impacts and dependencies in line with the TNFD recommendations, including ASX listed companies such as Qantas, Telstra, and Brambles.

The Summit also saw the launch of Nature Positive Matters, a network of more than 20 organisations including Blackmores, AACo, Wesfarmers, Bega Group, Qantas, Rest Super and Lion Group. Nature Positive Matters members will work together to support business uptake of nature-related reporting and data collection. The initiative creates a network of leaders who recognise the growing international importance and economic value of looking after nature.

Updated mandatory climate reporting guidance

On 9 September 2024, the Federal Parliament passed landmark legislation to establish an internationally aligned climate reporting regime in Australia. To capture the latest regulatory and market developments, AICD, in collaboration with Deloitte and MinterEllison, published Version 2 of our Director’s Guide to Mandatory Climate Reporting resource last month.

This Version 2 update replaces our earlier guidance on mandatory climate reporting issued in 2023. It maintains a focus on the core elements of the reporting regime, including: 

• an overview of the reporting framework; 
• key director responsibilities; and 
• practical steps boards can take to help their organisations navigate this important change. 

ASIC Chair Joe Longo, in his Foreword to the guide, describes these new requirements as “the biggest change to corporate reporting in a generation,” underscoring the critical role directors will play in managing this transformation. 

BP scales back net zero targets

Last week, it was reported that BP has diluted its net zero targets to regain investor confidence. In 2020, BP’s energy transition plan pledged to cut oil and gas production by 40% while rapidly growing renewables by 2030. BP scaled back the target to 25% in 2023 as investors focused on near-term returns rather than the energy transition.

BP joins several global companies such as Volkswagen and Unilever in reducing their ESG commitments in recent times. This has been attributed to an increased focus by investors on near-term returns rather than the energy transition and a response to a political backlash in the US. Institutional investors such as BlackRock only supported 4% of shareholder ESG proposals during FY24, compared to 47% three years ago, whilst Vanguard supported none during the 2024 US proxy shareholder season. To date, there has been very little activism by groups in Australia encouraging companies to walk back their climate targets.

To assist Australian directors set climate targets for their organisations and ensure they remain accurate, the AICD has a guide for directors, Principles for setting climate targets. The resource includes 10 guiding principles to assist boards in developing, implementing, communicating and reviewing climate targets. At each of the four identified phases of the target-setting process, the resource provides suggested questions for directors to ask management to support effective oversight.

Market developments update 

ASIC's Vanguard greenwashing action results in record $12.9 million penalty: Last month, the Federal Court ordered Vanguard Investments Australia to pay a $12.9 million penalty for making misleading claims about environmental, social and governance (ESG) exclusionary screens.

Investors back down on BHP climate protest vote: Last month we reported that BHP had received a shareholder resolution requesting more details on scope 3 emissions reductions. Denmark’s largest pension fund withdrew the resolution after BHP provided additional information on its planned investment in steel decarbonisation.

7 key messages from New York Climate Week 2024: New York Climate Week 2024 took place last month. A key message was that collaboration is more effective than competition. Gill Einhorn, Head of Innovation and Transformation, WEF, comments that, “evolutionary biology reminds us that the most collaborative have historically survived.” Another key message included a need for Indigenous peoples to be more directly involved in shaping policy action.

Advancing Resilient Nature Positive Insurance in Australia: At the Summit, the Insurance Council of Australia launched a report on the connections between insurance and the environment and explores the concept of ‘nature-positive insurance’. The report also highlights that activity that supports and safeguards nature and nature reliant assets are emerging as effective strategies for insurers to protect insured assets and build resilience to climate change impacts.

‘Nature-negative’ – the federal government subsidies harming biodiversity: The Biodiversity Council released a report stating that around 4% of the federal budget goes to subsidising activities that are likely to have a medium to high adverse impact on biodiversity, a total of $26.3 billion per year.

Funding for sustainable aviation fuel production in Australia: On 27 September 2024, the Australian and Queensland governments announced $14 million in joint funding to support a homegrown sustainable aviation fuel (SAF) project that will convert ethanol – made from agricultural waste – into jet fuel.

International developments:

2024 AGM Season: What are the latest trends in the UK? Key trends included:

• Continued disruption by climate NGOs and other activists - the primary targets remained the oil majors and some financial institutions. NGOs and activists are increasingly turning to more high-profile ways to exert pressure on boards to reduce greenhouse gas emissions and align with the Paris Agreement’s 1.5°C target. In particular, climate litigation is on the rise.
• Fewer shareholder-requisitioned resolutions – one interesting US development concerns ExxonMobil’s lawsuit launched against two climate-focused shareholder groups, Arjuna Capital and Follow This, to block their resolution pushing for Exxon to reduce its greenhouse gas emissions.
• A shift away from ‘say on climate’ resolutions towards enhanced disclosure of transition plans - listed companies are being encouraged to focus their efforts on disclosing information about their transition plans, using the UK’s Transition Planning Taskforce's Disclosure Framework (now under the responsibility of the IFRS Foundation).

Voluntarily applying ISSB Standards – A guide for preparers: At New York Climate Week, the IFRS Foundation published a guide which aims to encourage companies to start using ISSB Standards and help communicate to investors their progress towards applying them voluntarily.

Exxon suing Netherlands Government over gas phaseout plans: US oil and gas giant is suing the Dutch Government over its decision to accelerate the closure of a gas field in the Northern Netherlands. This is the latest in a trend of ‘anti-ESG’ litigation which see corporations contesting the imposition of ESG obligations.

New resources from the CGI International network

• Transition planning – a guide for directors: The Institute of Directors (IoD) in New Zealand has produced a transition planning guide for directors, along with the NZ External Reporting Board. This guidance is an introductory reference for directors of Climate Reporting Entities as they commence transition planning but can also be used to support transition planning by the broader governance community.
• Directors’ Dialogues: Stewardship in the Boardroom: Last month, CGI launched its new podcast series which takes a deep dive into the stewardship journey of board directors sharing their experiences, challenges, and successes in navigating climate action and integrating it into the boardroom. The first two episodes focus on making sustainability an economic imperative in the boardroom and effective climate leadership in the not-for-profit, family-owned and private sectors.

For the calendar:

• 21 October 2024: Chapter Zero/NZ IoD Climate Governance Forum
• 21 October–1 November 2024: COP16 United Nations (UN) Biodiversity Conference, Cali
• 11–22 November 2024: COP29 UN Climate Change Conference, Baku
• 14 November 2024: AICD webinar - Nature-Related Risk Assessment in Practice – How can boards get started?