Own AGL (ASX:AGL) shares? Is Australia’s biggest emitter taking climate change seriously enough?

A new report suggests AGL’s demerger might have been avoided if its board was more serious about climate risks.

| More on:
Worried girl holds model of planet loking sad.

Image source: Getty Images

Those invested in AGL Energy Limited (ASX: AGL) shares might be interested in new findings suggesting most S&P/ASX 200 Index (ASX: XJO) companies’ boards aren’t equipped to tackle climate change.

A new report by Investor Group on Climate Change (IGCC) has analysed the boards of 15 ASX 200 companies involved in Climate Action 100+ – AGL’s included.

As The Motley Fool Australia reported yesterday, the report found many boards don’t see climate change as a business risk. Further, it found multiple holes in companies’ climate-related disclosures.

As of yesterday’s close, the AGL share price is $5.30. That’s 1.4% lower than it was at the end of Friday’s session.

Let’s take a closer look at what the report could mean for owners of AGL shares.

AGL shareholders may lose on climate change

According to the IGCC, ASX 200 companies’ directors generally don’t have the skills or experience needed to understand climate change risk, disruption, and company transformation.

It also found that climate risk is often pigeonholed into a separate risk category. Thus, its generally not included in a company’s overall risk strategy or management.

Additionally, the report found that many companies fail to address climate-related technological risks and opportunities. It noted that failure has bitten AGL already.

As those invested in AGL shares probably know the company is planning to split in two in the near future. As noted by AGL chair Peter Botton, the report says, on announcing the demerger:

There is no doubt that the winds of change in the electricity market have been substantially faster than many people had anticipated; certainly, from my perspective, those winds have been extremely fast. I certainly didn’t see quite the level of change and the acceleration of that change here in my thinking 12 months ago and I believe that would be representative of the AGL board.

Worryingly, AGL isn’t alone in missing critical changes in technology and stakeholders’ concerns.

But IGCC argues that it’s a board’s job to understand, foresee, and assess climate-related changes affecting its organisation.

Therefore, the report states that oversights such as AGL’s expose those who own ASX 200 shares to unnecessary risk.

IGCC director of corporate engagement, Laura Hillis commented:

Boards that fail to recognise the risk of climate change and their role in driving the company transition to a low carbon business, will leave the company and investors exposed to unacceptable financial, strategic and market risks…

There are huge opportunities for Australian companies in the transition to net zero emissions. Investors want companies to capitalise on the transition.

Should you invest $1,000 in AGL Energy right now?

Before you consider AGL Energy, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and AGL Energy wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Energy Shares

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the 30% increase in Pure Hydrogen's share price today
Energy Shares

Why the Pure Hydrogen (ASX:PH2) share price is rocketing 30% today

Key points Pure Hydrogen stock is soaring on the ASX today The company has entered a joint venture in India …

Read more »

An oil miner with his thumbs up.
Energy Shares

Why are AGL (ASX:AGL) shares having such a stellar start to 2022 while the ASX 200 is struggling?

Key points AGL was one of the worst performing ASX 200 shares of 2021 But 2022 has given this company …

Read more »

a smiling woman holds up two fingers and winks.
Share Gainers

Top 2 ASX 200 shares of the year so far revealed

S&P/ASX 200 Index (ASX: XJO) shares as a whole haven’t gotten off to the strongest of starts in 2022. After …

Read more »

A man in suit and tie is smug about his suitcase bursting with cash.
Energy Shares

Is Santos (ASX:STO) about to enjoy a $3 billion payday?

Owners of Santos Ltd (ASX: STO) shares might want to keep an eye on the company’s Papua New Guinea assets …

Read more »

Businessman walks through exit door signalling resignation
Energy Shares

Woodside (ASX:WPL) share price slightly retraces following Myanmar withdrawal

Key Points Woodside shares remain in positive territory amid management decision to end investment in Myanmar Political unrest along with …

Read more »

oil can falling over and spilling coins signifying fall in oil share prices
Energy Shares

Why are ASX 200 energy shares tumbling on Tuesday?

Key points The ASX 200 energy shares make up the worst performing sector on Tuesday They’re likely being weighed down …

Read more »

A miner in visibility gear and hard hat looks seriously at an iPad device in a field where oil mining equipment is visible in the background.
Earnings Results

Beach Energy (ASX:BPT) share price tumbles 7% on production slide

Key points The Beach Energy share price is under pressure Production levels fell quarter on quarter Higher oil prices helped …

Read more »

Two miners standing together with a smile on their faces.
Resources Shares

Two top ASX 200 mining shares to watch in 2022: Saxo Markets

Key points These 2 ASX 200 miners have trounced the index in 2022 A strong outlook for iron ore could …

Read more »