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Almost 90 per cent of the top 100 Australian businesses recognised climate as a financial risk up from 78 per cent in 2020, says the firm.
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ASX 100 outperforms top globals on ESG, says KPMG
21 October 2022
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10 minute read
The ASX100 businesses outperform their international equivalents when it comes to environmental, social, and governance (ESG) reporting according to a study by KPMG.
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Approximately 90 per cent of ASX100 businesses recognised climate as a financial risk compared to only 64 per cent of the largest 250 global companies (G250), according to the firm.
The number of ASX100 firms that report carbon targets has also increased from 67 per cent in 2020 to 89 per cent currently, topping G250 businesses of which only 80 per cent report the targets.
The increase in both factors was pleasing to see according to KPMG Australia partner in charge, sustainability, climate change, and ESG services, Adrian King.
“The study finds a significant and welcome increase both in quantity and quality of climate reporting by the ASX100,” said Mr King.
“The great majority are now detailing material risks and reporting carbon targets — there has been a substantial improvement from just two years ago, which shows that even largely in the absence of public policy directives, Australian companies are taking the initiative and meeting demands from their stakeholders, such as investors and regulators.”
KPMG also found that 74 per cent of the ASX100 report according to what is classed as the ‘gold-standard’, the Task Force on Climate-related Financial Disclosures (TCFD) framework, compared to only 61 per cent of the G250.
“It is encouraging that almost three-quarters of the ASX100 are now using the TCFD framework for climate reporting and decarbonisation reporting — and the publication of the new proposed international sustainability standards, largely based on the TCFD framework, should see another boost to reporting in this key area,” said Mr King.
“But while the large majority of the ASX100 report on the ‘S’ and ‘G’ parts of ESG, the reporting is mostly narrative and more quantitative details are needed here.”
KPMG also found that only 45 per cent of ASX100 businesses reported risks from the loss of biodiversity, whereas 46 per cent of G250 companies reported them.
Banks, oil and gas producers, forestry and paper, water, and multi-utilities businesses were the main reporters on biodiversity, but only 43 per cent of food and drug retailers and food producers reported on it at all.
The report also discovered other areas in which ASX100 firms needed to improve.
“Firstly, there has been a stagnation in the numbers of the ASX100 getting their sustainability reports externally assured — with ‘greenwashing’ a growing problem, independent verification of reported data is important,” said Mr King.
“Secondly, the percentage of companies who have a dedicated board or top executive member responsible for sustainability is still just under half (49 per cent).”
KPMG derived the information from its biannual study of sustainability and ESG reports of over 5,800 companies across 58 countries, which also outlined ways that businesses could improve their sustainability reporting.
These included understanding stakeholder expectations, using materiality assessments to focus the content of sustainability reporting, aligning reporting to mandatory or voluntary frameworks, investing in quality non-financial data management, and understanding the impact of climate change and social issues on the business.
“New ESG requirements are driving a different perspective and set of conversations in boardrooms, causing business leaders to stretch their thinking and ensure that from the top down they are making strategic decisions that take climate and broader ESG considerations more into account,” said Mr King.
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