When it comes to climate change governance, Australia’s company boards and directors feel that regulators and policymakers are tightening the screws but think they are now under less pressure from investors, lenders and other stakeholders.

This takeaway from the Australian Institute of Company Directors’ (AICD) Climate Governance Study 2024 may provide some food for thought for those asset owners believing their climate advocacy and investee engagement activities are having an impact.

The study, released this month, says “directors in all sectors report a reduction in pressure regarding climate action” from investors, bankers, civil society (e.g. activist groups and media),  employees and customers compared to the levels reported in the AICD’s inaugural 2021 study.

For example, in 2021, 47 per cent of directors felt pressured (to a large or moderate extent) by investors/shareholders. But this has now fallen to 37 per cent.

The exception to this trend was an increase in pressure exerted by the Australian government and regulators, particularly on listed companies.

This no doubt reflects the imminent introduction of mandatory climate-related disclosures and ASIC’s focus on greenwashing (which actually shouldn’t be a concern if companies simply resist making misleading statements).


Directors interviewed as part of the study attributed the easing of stakeholder pressure “to more companies addressing climate issues as well as civil society actors increasingly relying on policy and regulation to drive action”.

However, the directors interviewed may be deluding themselves if they think corporate action on climate is the reason directors feel they are under less pressure from 7 of the 8 stakeholder groups included in the study.

This is because the study also reveals only 43 per cent of the listed company directors surveyed are on boards with climate targets and transition plans – although this is a lot higher than the average across all sectors.

Source: AICD Study 2024

Also, only a third (34 per cent) of directors report that climate change has been embedded into risk management frameworks, an 11-percentage point drop from 2021. And only a fifth (20 per cent) of boards had climate risk metrics in place, down from around a quarter (26 per cent) in 2021.

The study noted, “this is a surprising finding and did not seem to align with other survey results such as elevated board recognition of the materiality of climate”.

A possible or plausible explanation here is that there is too frequently a difference between director rhetoric and real action on climate change. Saying that climate change is a material risk and being prepared or equipped to do something about are different things.

Confidence drop

The 2024 survey revealed a big drop in listed company directors’ confidence about whether their boards had the knowledge or experience to adequately address climate governance issues. Compared to three years ago confidence has dropped from 63 per cent to 51 per cent.

Source: AICD Study 2024

The study notes that board confidence levels overall are not improving – despite what the AICD believes are “increasing capability development efforts” and says this may be “perhaps reflecting growing understanding of  the challenge at hand”.

The AICD says “this suggests that many boards are revising their views of board capability and the standard of understanding required to meet stakeholder demands”. This does, however, seem at odds with directors feeling they are under less pressure from stakeholders.

When asked whether their board needed to increase the attention it paid to climate governance, 60 per cent of directors agreed, up 14 per cent since 2021.

The AICD, which hosts the Australian chapter of the Climate Governance Initiative (CGI),  says this is “a further indication of increasing consensus at board level of climate as a core governance issue”.

Source: AICD Study 2024

Gender difference

There was, however, a significant gender difference on the question of whether boards should pay more attention to climate change. Seventy-five per cent of female directors agree their boards should pay more attention compared to only  50 per cent of males.

Agewise, there was the greatest ‘desire’ among 35-44 year-olds (77 per cent)  and the least desire from those aged 75 years and above (24 per cent).

The results here of course highlight the differing views and perspectives that can be held by different directors on the same board. They also suggest you can some insights as to how a board is likely to approach climate governance by studying its demographics.

The study is also a reminder to those asset owners who see themselves as universal owners that listed companies represent only part of the economy. Reflecting the AICD’s membership base only 16 per cent of the online survey participants are directors of listed companies. Thirty-eight per cent sat on unlisted company boards.

Interviews conducted by consultancy Pollination as part of the study revealed “notable concern about less scrutinised unlisted companies, indicating a potential ‘blind spot’ in current climate governance practices”.

“Directors interviewed for this study call for increased scrutiny and accountability for unlisted companies, which often compete in the same markets as their listed counterparts,” the study said.

Figure 11 below shows that 53 per cent of directors from listed companies felt under pressure from investors to act on climate change from investors whereas only 40 per cent of unlisted directors felt pressured.

Source: AICD Study 2024

Easy-lending banks

Figure 11 also highlights how banks/lenders don’t seem to have much stomach for – or interest in  –  being too strict on borrowers.

If climate-conscious asset owners want to have more of an impact they might consider ramping up their own pressure on the big four Australian banks – that account for such a sizeable chunk of their investment portfolios – to review their lending policies.

From a cost of capital perspective, a bank deciding not to rollover an expiring loan to a company that has no interest in, say, setting a climate target or developing a climate transition plan is likely to have a bigger impact on that company than a super fund divesting its shareholding in a highly-liquid marketplace.

Unfortunately, however, this assumption also implies that a bank may not be that fussed if an asset owner sells its shares as they will be quickly gobbled up by another institutional investor.

Less scrutiny of unlisted companies also means it makes sense for, say, listed fossil fuel producers to solicit offers to take themselves private. This would dim the spotlight on them and there is reasonable probability they will still find banks to finance their projects.

As one interviewed director said “If a company has a coal mine, what do they do? They go private.”

The study says a significant challenge for directors has been short-term financial demands from some investors. “Directors are navigating mixed expectations from investors: some prioritise immediate returns, while others, with a longer-term perspective, emphasise sustainable growth.

Interviewed directors said in some cases sustainability was seen as “a second-order issue by investors – only of interest once financial goals were already being met”.

According to an ASX non-executive director: ”If the company is unable to meet the financial targets shareholders are not interested in non-financial issues.”

The ship has sailed

The AICD study concludes it is clear “climate change is now firmly embedded as a mainstream boardroom agenda item with directors seeking to act on both the risks and opportunities posed by the move to a net zero economy”.

But is being an agenda item enough? The director survey seemed premised on climate change being yet another burden that has been foisted upon directors.

The survey’s lead question was “How concerned is your board about climate change as a material risk to your organisation?”. There is, however, no question relating to views or feelings on director responsibility for allowing this risk to materialise over many years.

“We are worried about emissions reduction and so on, but it can take board attention away from more important and devastating weather risk management issues. It’s been weather risk management that’s been the biggest challenge in my companies in the past 10 years,” one interviewed director said.

With the Australian Government now developing a National Adaptation Plan, adapting to climate change is obviously important but this reads as if there is no link between rising greenhouse gas (GHG) emissions and the increased incidence of extreme weather events.

Another AICD member’s survey open-text response read: “We have moved to adaptation as a priority for resources, above emissions reduction. It’s now clear the ship has sailed on emissions reduction – does not mean we should not do it – but adaptation is a priority for commercial survival.”

Sounds like for directors, helping the world to move to net zero inevitably runs a poor second to maintaining individual company profits.

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