This report provides a status update of corporate responses to the 1.5-2°C Paris Agreement objective. It also, identifies gaps and challenges, and their implications, and offers recommendations for driving strong responses and more meaningful climate risk disclosures. In sharing the experiences from those in the vanguard of climate risk response, we hope that others contemplating action may benefit from lessons learnt so far in this area of increasing importance.
The past two years have seen significant shifts in corporate activity regarding climate change. For businesses, the entry into force of the Paris Agreement has perhaps been the key catalyst to contemplate a future policy environment consistent with its objective of limiting global warming to well below 2°C above pre-industrial levels. Some companies are committing to and disclosing carbon targets informed by the Paris Agreement. Others have performed and published scenario analyses showing the impacts on the business from various climate policy futures.
Both KPMG and The Climate Institute aim to encourage and facilitate robust actions to understand, respond to and communicate the risks and opportunities flowing from climate change. In undertaking this research, we sought to explore the state of corporate responses to the 2°C objective, and the Agreement’s more ambitious 1.5°C objective, as well as companies’ motivations for action and challenges faced.
The pace of change in this area is so rapid that proposed guidelines and solutions for addressing the challenges identified by companies were developed and issued while this research was being carried out. Additionally, the focus of investors and regulators on climate risks have been sharpened, 1) by the legal profession’s opinion on directors’ duties with regard to climate change, and 2) by APRA’s plans to monitor the adequacy of companies’ assessments and responses to climate risk in accordance with their risk management frameworks.