Boards to face climate scrutiny
A MAJOR investor group has started probing the credentials of non-executive directors at Australian energy companies, questioning whether stacking boards with oil and gas veterans was appropriate given escalating climate pressures.
The $US54 trillion ($70 trillion) Climate Action 100+ group said shareholders were concerned that the boards of energy producers may be ill equipped to drastically cut emissions and move into new areas beyond hydrocarbons.
“With oil and gas companies traditionally you will have a board that is predominantly comprised of people from oil and gas backgrounds, which makes perfect sense if the company is going to continue to be an oil and gas company. But with most of the companies we’re engaging with they’re telling us they want to transform into a different type of company,’’ Climate Action 100+ Australia director Laura Hillis told the Appea conference on Wednesday.
“So the questions for investors then becomes, is this company’s current crop of directors capable of transitioning this company and steering it in a new direction?
“It’s something we’re going to see shareholders engage with companies a lot more – do you need more climate expertise, do you need more innovation and R&D expertise and what is the skill set to take this company into the future?’’
Australian oil and gas producer Santos warned the industry that it could suffer the same funding strike that has hobbled coal unless they step up action on climate change. The industry was rocked by
climate decisions in May, hitting three international giants who are among Australia’s biggest oil and gas producers.
One decision, by a Dutch court, found that Shell, owner of Queensland and West Australian LNG projects, was partially responsible for climate change and ordered it to sharply cut carbon emissions.
Its Australian chairman, Tony Nunan, said parts of the legal ruling were frustrating even as Shell agreed producers must step up their response to climate concerns.
“The Dutch court decision is an example of society really asking us, ‘are we going fast enough and can we push faster?’. Parts of that decision are disappointing and the bits that are disappointing are that it is difficult for one company alone to be able to change the outcome,’’ Mr Nunan said.
The court found that Shell must curb its carbon emissions by 45 per cent by 2030 compared with 2019 levels.
The Australian Conservation Foundation told the Appea conference producers including Shell could not justify opening new oil and gas fields and said companies needed to target net zero emissions by 2035 rather than an industry standard of 2050.
“Opening up new gas fields knowing the impacts they have on climate change is irresponsible. It is certainly morally irresponsible,’’ ACF chief executive Kelly O‘Shanassy said.
Kassia Yanosek, of industry consultant McKinsey, told the conference the industry had been ripped by a “perfect storm’’ with Covid-19 hitting oil demand as investors urged companies to boost their environmental ambitions.
Mr Nunan also stressed the importance of ensuring that low or zero carbon investments stacked up and delivered profits as the energy industry transitioned to cleaner supplies.