Financial services 'structurally behind' on calculating climate-related risks

Sustainability consultancy ERM has analysed 33 disclosures under the Australian Sustainability Reporting Standards, which commenced on 1 January 2025, and found that less than one third of businesses have provided quantified financial impact on earnings, balance sheet or cash flows. 

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Notably, most companies (around three-quarters) have also used first year exemptions to defer complex value chain related Scope 3 emission reporting, a measure of indirect greenhouse gases released outside of their control, including supply chain, employee commute, and product disposal.

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Specifically, financial services businesses are "structurally behind" their peers in energy and resources sectors, which Stewart said should worry investors. "Governance structures are solid but on metrics and targets, the pillar that captures whether climate risk is being managed, not just acknowledged, the sector scores lowest in the analysis," Mary Stewart said.

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She added the current gap between identified climate risk and capital deployed to address the issue is stark, reflecting that companies haven't fully translated internal work into public accountability. As a solution, she is encouraging investors to use AGM season to seek clarity on how seriously businesses are taking climate risk.