How are ASX 200 shares faring in the carbon revolution?

A carbon revolution is underway, but are companies listed on the ASX doing enough? Let’s look at what Climate Action 100+ thinks.

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Rating ASX 200 shares represented by white paper with A plus, B plus and C minus written in red pen

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A carbon revolution is underway, but are S&P/ASX 200 Index (ASX: XJO) companies doing enough? A report from investor group Climate Action 100+ has assessed the environmental initiatives of 11 Australian companies it believes are important to a global net-zero emissions transition.

Climate Action 100+ is made up of more than 570 investors who, when combined, manage more than US$54 trillion. The group aims to ensure large corporate greenhouse gas emitters take action on climate change.

Let’s take a dive into which ASX 200 companies are doing their bit in the fight against climate change and which need to do substantially more. 

How were the companies assessed?

Climate Action 100+ looked into whether the companies had made specific commitments to reducing emissions. These commitments included:

  • An ambition to reach net-zero greenhouse gas (GHG) emissions by 2050, with short, medium and long-term targets.
  • A decarbonisation strategy.
  • A plan to decarbonise future capital expenditures.
  • Engagement and alignment with climate policy, particularly the Paris Agreement.
  • A board with a clear focus on climate change.
  • Commitment to implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

How are these ASX 200 companies performing?

Santos Ltd (ASX: STO)

According to Climate Action 100+, Santos is leading the carbon revolution out of the ASX 200 companies assessed.

Santos actually managed to at least partially satisfy all but one of the commitments.

While the energy producer missed out on commendation for a plan to decarbonise its future capital expenditures, its decarbonisation strategy was one of the best of the bunch.

BHP Group Ltd (ASX: BHP)

Doing its bit for the ASX 200’s carbon revolution is BHP. Though, according to Climate Action 100+, the mining company still has some work to do yet.

BHP’s net-zero GHG emissions by 2050 ambitions were found to be not ambitious enough but did partially satisfy Climate Action 100+’s requirements.

The miner was commended for its decarbonisation strategy, climate governance and commitment to implementing the recommendations of the TCFD disclosure.

Although, it was found that BHP is not working to decarbonise its future capital expenditures. 

Woodside Petroleum Limited (ASX: WPL) 

Woodside Energy was able to partially tick off most of the commitments set by Climate Action 100+.

The petroleum company was unable to account for a decarbonisation strategy or a plan to decarbonise its future capital expenditures.

AGL Energy Limited (ASX: AGL) 

The energy company was found to have a strategy to achieve net-zero GHG emissions by 2050, although Climate Action 100+ noted it didn’t provide a clear means of doing so between 2026 and 2035.

AGL was found to have some climate policy engagement and its board has a focus on protecting the climate.

Finally, the company has commitments to implement the recommendations of the TDFC disclosure.

South32 Ltd (ASX: S32) 

South32 partially satisfied most of the commitments, but missed a few key ones.

The mining company wasn’t seen to have any medium-term GHG reduction targets, a decarbonisation strategy or a plan to decarbonise its future capital expenditures.

Woolworths Group Ltd (ASX: WOW) 

Woolworths managed to scrape in some good GHG reduction targets. Alas, Climate Action 100+ noted it didn’t have any to aim for in the short term.

The retail giant also fell short of a decarbonisation strategy and a plan to decarbonise its future capital expenditures.

All in all, it partially satisfied most of the commitments.

Origin Energy Ltd (ASX: ORG) 

Leading the ASX 200 in one aspect of the carbon revolution is Origin. The energy company is the only company on the list that has an executive remuneration scheme incorporating climate change performance elements, but that didn’t stop it from only partially fulfilling most of Climate Action 100+’s commitments. 

Origin did have a partial GHG emission reduction target, but only until 2035. It also showed some climate policy engagement and some climate governance. As well as some commitment to implementing the recommendations of the TCFD disclosure.

Boral Limited (ASX: BLD) ­

Boral partially satisfied less than half of Climate Action 100+’s commitments.

The cement company has a GHG emissions reduction target, but only until 2025.

It also has some engagement with climate policies and discloses its trade associations memberships.

Boral’s board discloses evidence of its board’s management of climate change risks with a named position on the board responsible for climate change policy.

Finally, Boral has commitments to implement the recommendations of the TCFD disclosure.

Adbri Ltd (ASX: ABC) 

Adbri also only managed to partially satisfy less than half of the commitments.

The cement company does indeed have a GHG emissions reduction target, but only until 2025 and it has not aligned with the goal of limited global warming to 1.5°C.

It also has a specific commitment to ensuring its trade associates are members of the lobby in line with the goals of the Paris Agreement and discloses its trade associations memberships.

Adbri’s board discloses evidence of board management of climate change risks but does not have a named position at the board level with responsibility for climate change policy.

Qantas Airways Limited (ASX: QAN) 

Qantas only managed to tick off a net-zero GHG emission reduction ambition by 2050. Though, the airline’s board was seen to have some focus on climate change.

The airline also showed commitment to implementing the recommendations of the TCFD disclosure.

BlueScope Steel Limited (ASX: BSL) ­

Still with some work to do to meet Climate Action 100+’s commitment to the carbon revolution, is BlueScope.

The only indications of a climate change strategy from the steel company were targets for reducing GHG emissions, but only between 2026 and 2035. It had some evidence of its board’s focus on climate change and a commitment to implementing the recommendations of the TCFD disclosure.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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