June 9, 2020
Australian companies fall short on ESG according to new Refinitiv report
Report highlights that companies are setting emission policies without delivering on targets
Sydney – Refinitiv has today released the findings of Financing a Sustainable Future in Australia, a new report which looks at the environmental performance of Australian companies compared to global peers.
The report finds that Australia’s largest companies are well below their global peers in reporting on environmental sustainability. Australia’s average environmental pillar score is 45.36, well below the global average of 59.6 and behind regional peers, such as Hong Kong (70.06), South Korea (64.57) and India (63.12). These environmental scores are based on performance across three themes: emissions, resource use and innovation.
With a breakdown of the average environmental pillar score for each Australian business sector the report reveals some areas of improvement. The top three sectors are banking and investment services with 59.04 (up from 50.13 in 2014), insurance 57.37 (up from 44.27 in 2014), and telecommunications 55.07 (up from 39.04 in 2014).
Intention – Action Gap
While almost two-thirds (63%) of global companies have a policy to reduce emissions, up from 56% five years earlier, the report reveals only one-third of companies (35%) have specific reduction targets around emissions, indicating companies are setting policies without back up intentions.
Elena Philipova, Refinitiv’s Global Director of ESG, says we are also seeing this same emissions intention gap in Australia. “The number of companies with emissions policies in Australia have jumped from just over a third (31%) in 2014 to almost half (46%) in 2018. However, the number of companies with specific reduction target emissions has remained relatively stable with only a 7% increase (12% in 2014 to 19% in 2018).”
Waste not, want not
Waste and recycling activities are undertaken by almost 16% of companies in Australia, up slightly from 11% in 2014. Real estate, banking and investment services, and chemical companies are the sectors most likely to undertake these activities.
There has been an increase in the number of companies with resource reduction policies: 65% of Australian companies have these initiatives in 2018, up from 55% in 2014. However, Australia lags global trends in resource reduction policy, with more than three-quarters (78%) of global companies implementing such policies.
Globally water is acknowledged as the world’s most precious resource and in recognition of this, the report highlights that in the past five years there has been a 25% increase in global companies with water efficiency policies while 34% of companies are setting specific water efficiency targets.
After a protracted drought and a subsequent catastrophic bushfire season, Australians are aware of the importance of this resource, however the report found that slightly more than a third (36%) of companies have a water efficiency policy, with only 11% holding specific targets.
Philipova says that while the Refinitiv report highlights Australian companies have a long way to go in achieving better environmental performance metrics, future success will require a collaboration between the public and private sectors as well as mobilization of significant finances both in Australia and globally to succeed.
“The current COVID-19 pandemic has highlighted that ESG is not just a bull market phenomenon. We are now seeing that companies with better ESG risk profiles have outperformed the broad market since its February peak. Companies that focus on sustainability will be more resilient in downturns and better positioned to capture opportunities when economic activity resumes,” he says.
About the report
The Financing a Sustainable Future in Australia report is based on an analysis of Refinitiv’s latest ESG data. This data covers over 9,000 global companies representing 80% of global market capitalisation and includes 2,369 companies from Asia Pacific of which 283 are based in Australia. The Refinitiv ESG database covers more than 400 different ESG metrics with a history dating back to 2002. The environmental scores in the report are based on performance across three themes: emissions, resource use and innovation.
Director, Regional Communications, Asia Pacific
+65 9793 4140