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Australia falls behind on ESG

Lachlan Maddock
— 1 minute read

Australia’s biggest companies are trailing the world on environmental issues as the ESG debate heats up.

A new report from Refinitiv found that Australia’s largest companies are well behind their peers when it comes to environmental sustainability, trailing other countries in the region on issues like water efficiency and emissions.

“The current COVID-19 pandemic has highlighted that ESG is not just a bull market phenomenon,” said Elena Philipova, Refinitiv’s global director of ESG. “We are now seeing that companies with better ESG risk profiles have outperformed the broad market since its February peak.

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“Companies that focus on sustainability will be more resilient in downturns and better positioned to capture opportunities when economic activity resumes.”

Refinitiv calculated environmental scores based on emissions, resource use, and innovation. Australian companies trailed the rest of the world, with an average environmental pillar score of 45.3 – compared to a global average of 59.6 and well behind other countries in the region, including India (63.12) and South Korea (64.7). 

Despite increased attention on water efficiency brought about by the drought and the subsequent bushfire season, only slightly more than a third of Australian companies have water efficiency policies, with only 11 per cent holding specific targets. Australian companies also lacked well-defined emissions policies despite increasingly high-profile divestments from fossil fuel companies. 

“The number of companies with emissions policies in Australia [has] jumped from just over a third (31 per cent) in 2014 to almost half (46 per cent) in 2018,” Ms Philipova said. “However, the number of companies with specific reduction target emissions has remained relatively stable with only a 7 per cent increase (12 per cent in 2014 to 19 per cent in 2018).”

However, banking and investment services lead the pack in Australia, with a score of 59.04 – up from 50.13 in 2014 – trailed by insurance (57.37) and telecommunications (55.07). 

Refinitiv believes that future successes in environmental sustainability will be a result of greater public-private collaboration, as well as mobilisation of “significant finances”. 

“Large corporations must play a bigger role in combating the climate crisis,” said Luke Manning, Refinitiv head of sustainability and strategic initiatives. “Their sheer size, influence and footprint [dictate] it.”

“The main blocker for combatting climate change is collective will and mindset, with three major stakeholder groups needing to align – individuals, businesses and the state.”

 

Australia falls behind on ESG
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