ASX100 companies global leaders in ESG and SDG reporting

30 March 2021 4 min. read

According to a benchmark from KPMG, Australia’s top 100 companies perform better than some of the largest firms in the world when it comes to sustainability-related financial reporting.

KPMG’s global study examined the G250 – the 250 largest companies in the world by revenue per Fortune 500 rankings – to gauge the status of climate risks in financial reporting. The report laid out 12 best practice criteria to evaluate companies, spanning key areas of governance, identification and impacts of climate risks, as well as net zero reporting.

Companies were also screened against recommendations from the Taskforce on Climate Related Financial Disclosures (TCFD) – a 2015 market-driven initiative from the Financial Stability Board aimed at improving sustainability reporting. KPMG describes TCFD as “the gold standard for reporting on climate risk and decarbonisation.”

KPMG's 12 criteria for climate risk reporting

Based off his elaborate framework, the ASX100 – top 100 companies on the Australian Stock Exchange – appear to be outperforming their global peers. Indeed 78% of the ASX100 now acknowledge climate change as a financial risk to business – markedly higher than the G250 average of 56%. Only France ranked better than Australia on this metric.

Then there is TCFD compliance. “Our research shows a substantial rise in the number of large Australian companies reporting against the TCFD framework,” noted KPMG’s Global Chair of Sustainability, Climate Change and ESG (environment, social and governance) services Adrian King – who himself is based in Australia.

Three years ago, only 16% of Australian companies were following TCFD recommendations. Today, this stands at nearly 60%. According to King, “this is very encouraging in the absence of public policy directives, and is being driven by business itself, investor demand and regulators’ calls for action.”

So climate risk reporting has made its way – voluntarily – into the top business priorities. In fact, across all areas of sustainability, TCFD disclosures and ESG reporting, the ASX100 is at par with if not better than their global counterparts. That being said, there is still work to be done when it comes to the rigour and quality of reporting in the country.

“Areas where they fall behind are reporting the impacts of climate change using scenario analysis and reporting science-based targets showing how they intend to transition to net zero carbon emissions,” explained King. Indeed, just over 40% of the ASX100 actually link their reporting to the Paris Climate Accord’s two-degree warming target. With regulations tightening and the climate crisis worsening, a more scientific approach might prove critical going forth.

Sustainable Development Goals

The good news is that Australian businesses are certainly signaling their intent to satisfy global conventions. Alongside remarkable TCFD compliance, this sentiment is notably evidenced by their sharpening focus on the United Nations Sustainable Development Goals (UN SDGs).

In 2017, KPMG found that less than 30% of Australian businesses referenced SDGs in their annual report of business activity. A new survey of more than 5,000 companies across over 50 countries at the end of last year revealed that this figure now stands at nearly 70% in Australia. Chief among the focus areas in Australia is SDG 13 – Climate Action.

“The 2020’s are often called the ‘decade of action’ for the SDGs, and the ones prioritised by business often symbolise what topics are at the forefront of societal discourse,” noted King. Not surprisingly, climate change occupies prime position, given its urgency as a humanitarian issue, as well as an economic one.

“Business is at risk not only from the physical effects of climate change but also the financial impacts of transitioning to a net zero economy,” said King.

Deloitte report from last year put this urgency into numbers – stressing that inaction on climate change could cost Australia’s economy more than $3 trillion in the lead up to 2070, while taking the right steps could deliver a $700 billion economic benefit.

Judging by their action, Australian businesses appear to have taken stock of the situation. And its not just climate change that is climbing their agenda. KPMG’s SDG analysis revealed that SDG 8 (Decent Work & Growth) as well as SDG 5 (Gender Equality) are referenced in more than 60% of annual reports among the ASX100. 

In the next two to three years, KPMG also predicts a rise in reporting related to biodiversity in Australia, “with 30 percent of ASX100 reporting SDG 15 – Life on Land as being relevant to their business compared to just 9 percent internationally.”