Speech to AICD Climate Governance Forum
Acknowledgement of Country
I would like to acknowledge the traditional owners of the land on which we meet and pay my respects to elders past and present.
The acknowledgement of country is a small, but necessary act of recognition.
Later this year our nation will collectively have the opportunity to undertake a much larger, but no less necessary act of recognition.
In voting Yes in the Voice referendum, we will be accepting First Nations Australians’ offer to join them on the road they mapped out at Uluru: Voice, Treaty, Truth.
A successful yes vote will be a unifying moment for our nation and importantly provide practical solutions to the unique challenges that First Nations people face.
I want to thank the Australian Institute of Company Directors for inviting me to speak here today.
With more than 50,000 members, no other organisation in Australia is better positioned to impact the conversation on climate change at the board level.
I have spent much of my professional life working on climate policy in the public and the private sector, but I largely worked on other policy questions during the previous two terms of parliament.
So when I took on this portfolio last year I had the opportunity to look at it again with (slightly) fresh eyes. When going through our first rounds of meetings and briefings in June last year I was struck by two contradictory thoughts – how much things had changed over the past decade, and, simultaneously, how much they had stayed the same.
There had been so little progress made at a national level during our lost climate decade. So much of the policy architecture, the regulatory apparatus, and the ambition had remained stagnant since I had last worked in the area. Except, of course, for the areas where we had gone backwards!
At the same time, however, there had been a tremendous transformation in the business community. So many businesses now had net zero plans and enterprise level targets. They were thinking in good and creative ways about the contribution they could make to mitigation efforts, and the risk posed to their business models by climate change. State governments including their business enterprises had stepped up, and the NFP and advocacy sector had advanced a far more sophisticated understanding of the challenges and opportunities.
In other words - in the absence of clear Commonwealth government action, the rest of our institutions simply got on with the job.
I understand that this has not been an easy task. As this room knows, a strong business case for climate action in your enterprise is a prerequisite, but it’s also not enough.
You need internal champions in your organisations who can build a coalition for change in senior management, in the board and amongst shareholders.
In some ways, this approach mirrors the approach to climate policy we have taken from opposition and into government.
Progress on climate in this country depends on maintaining a broad coalition of businesses, workers representatives, environmentalists, and ordinary people.
When we conformed our revised target with the UN, it meant also to do so flanked by the BCA, the ACTU, the ACF and other business advocates.
Progress also depends on what is, in essence, our business case – the policies that map out an affordable and effective path to net zero.
Our shared challenge
Since coming into office we’ve worked to repair the climate deficit left behind by the previous government.
In our first six months we increased the ambition in our climate target, put in place policies to help lead to 82% renewables in our energy system, reformed the safeguard mechanism for large emitters, and taken steps to restore integrity to the ACCUs market. And we didn’t stop there.
My message to you today is this – your climate efforts are not separate from our national efforts, they are an important part of it. The support of the business community for strong action on climate has been crucial to us being able to deliver on these policies. And the steps you have taken in your own organisations are a live demonstration that the transition to net zero is not only possible but also economically necessary.
But there is more to do at a Commonwealth level.
As indeed there would be in each of your organisations.
Good climate governance is a shifting target in a complex and changing economic and environmental landscape.
I wanted to touch on a few of the climate governance issues that your businesses may be grappling with and talk about the relationship they have with our broader national efforts.
The first of these issues is the need for good quality information to make good quality decisions
Everyone here would be familiar with the rationale for the Climate Governance Principles. The AICD summarises them as helping to:
“support directors to gain climate awareness, embed climate considerations into board decision making, and understand and act upon the risks and opportunities that climate change poses to their organisation.”
I couldn’t agree more and want to call out the good work that the AICD has done in endorsing these principles.
But the truth is that the decisions that a board makes can only ever be as good as the information it has before it. And good information can be hard to find. There are increasing numbers of mandatory and voluntary codes to comply with, and more complicated climate decisions coming before boards.
The current context requires corporate decisionmakers to analyse how climate risk manifests in supply chains, business operations and assets.
This is a process that the Commonwealth government itself, as an entity, is undertaking at the same time. In our first budget last year, we commissioned the Commonwealth Climate Risks and Opportunities Management Program. The program will develop the capabilities and systems needed for the Public Service to identify, manage and disclose climate risks and opportunities, including the development of the Climate Risk and Opportunity Strategy.
It is a big task. The Commonwealth Government is a huge entity – there are close to 157,000 members of the Australian Public Service nationwide. And we are starting later than we should because of the nation’s lost climate decade.
One of the benefits of this program, though, will be growing climate awareness across the public sector. A decade ago digital went from being a vertical function to a horizontal one, embedded in the work of all parts of government (and business). We are at a similar inflection point with climate.
And programs like the Climate Risks and Opportunities Management Program (which we’ve taken to calling the “CROMP”) help aid this transition.
The legacy of the work that individual departments do as part of the CROMP will be greater climate literacy across the public service. It is a process you may have seen in your own organisations.
But it’s not just enterprise level decisionmakers who need better information to make better, climate informed decisions. Consumers and investors are demanding that information too. That’s why Treasury is in the process of designing our own standardised, internationally aligned requirements for disclosing climate-related financial risks and opportunities.
We also know that access to new sources of finance is a strong motivator for businesses to invest in clean energy and adaptation. That’s why our government has committed to the development of a Sustainable Finance Strategy, which will include a taxonomy for sustainable investment.
I know that the AICD has been deeply engaged in the development of these standards and we are thankful for your important contributions.
The second issue I wanted to touch on was the need to respond to our evolving understanding of risk
July was the world’s hottest month ever recorded. Even more extreme heat is forecast to come.
It is a powerful reminder of the need for action - reports from the Intergovernmental Panel on Climate Change continue to tell us that there is a rapidly closing window for climate action.
A visibly changing climate will only increase the pressure on governments and businesses alike to act. Your customers, suppliers, staff and investors will know more and care more about your climate performance than ever before.
But corporate decisionmakers need to focus on more than just transition risk.
The hot northern hemisphere summer is just the latest manifestation of the physical risk that climate change presents. A warming world presents risks to the physical security of everything from supply chains to hard assets.
We need to be better prepared.
While many companies have a net zero plan, an S&P assessment of 10,000 companies around the world found that only one in five has a plan in place to adapt to the physical risks of climate change.
This is the next big climate challenge that many of your enterprises will have to deal with.
We have started thinking about role of the Commonwealth government in tackling this as well.
Many Australian communities, for example, are already experiencing the impacts of climate change – from rising heat and coastal erosion to catastrophic floods and bushfires.
Natural hazard risk has increased in many regions and has driven up the cost of insurance. This has left many households either underinsured, or simply unable to afford insurance at all. The industry has recognised this problem – and knows that it is not going away quickly. The government has established the Hazards Insurance Partnership between the insurance industry and the government to put downward pressure on insurance premiums.
But we need a more systemic approach for the future, across the broader economy. That is why we are producing Australia’s first National Climate Risk Assessment.
The Risk Assessment will draw together climate science with social, economic, environmental and population data. This means that for the first time, we’ll have a national picture of the risks we need to address together.
I want this to be a useful tool for communities – and businesses – in understanding the physical risks we will need to adapt to over the coming years. I would encourage you all to engage with the process. It will culminate in a National Adaptation Plan that will establish a clear picture of our national priorities, and support better decision making by governments, businesses, and communities.
The final issue I wanted to address is the need to remain focused on the real reason climate action
In a world of proliferating codes and standards and certifications it would be easy to mistakenly think climate is a compliance issue.
It is not.
When faced with ten years of government inaction, industry led the way in charting Australia’s path to net zero because you recognised the importance of committing to net zero and a clean energy future.
A 2022 report by ACSI found that net zero commitments are now the norm for Australian companies, with 70% of the ASX200’s collective market capitalisation adopting net zero commitments.
Those targets will not be set and forget. As technologies develop and business processes change so will your level of ambition.
Clever accounting will not keep warming to 1.5 degrees.
What will matter in the long run are real efforts to reduce emissions. And these also happen to be the efforts that are most immune from claims of greenwashing.
One of our first acts in government was legislating our national targets of 43% emissions reduction by 2030, and net-zero by 2050.
In the last twelve months we have continued to build the policy infrastructure required to rapidly decarbonise Australia’s economy.
We recently established the Net Zero Economy Agency, which will lead work to ensure an orderly and positive economic transformation across Australia as the world decarbonises.
Last month Minister Bowen announced that we will be developing sectoral decarbonisation plans.
As Minister Bowen said at the time, Australian and international investors have been clear that government-guided sectoral plans are vital for attracting billions in new investment in decarbonisation in Australia.
Government will be working with industry, experts, advocates, and the community to develop sectoral decarbonisation plans, and we plan to have heavy rounds of engagement for each.
Your plans for decarbonisation at enterprise level provide us with important information – about what industry’s ambition is, what is possible now, and what may be possible in the future.
So my ask of you is – don’t stop.
Continue in your commitment to good climate governance.
Continue to assess your risks and disclose them.
Continue to invest in clean energy and adaptation.
And continue to work in partnership with government to confront the challenges of climate change.