Shareholders target QBE over climate change 'failure'

QBE Insurance Group has become the latest big listed company to be hit with a demand for more transparency about potential risks it faces from climate change, amid calls by a prominent company director for boards to consider "uncomfortable questions" on the issue.

Melbourne NGO Market Forces, which last year filed similar resolutions targeting Santos, Oil Search and Origin Energy, has this time teamed up with the $10 billion Local Government Super to call for more disclosure of climate risks by the insurer.

The two groups have filed a shareholder resolution - to be voted on by investors at the QBE AGM in May - asking the company to disclose climate risks using a newly-minted set of rules endorsed by major companies and investors around the world.

LGS, which last year voted in favour of several Australian shareholder resolutions related to environmental or social issues, said climate change risks posed "very significant investment issues for the insurance industry, and these have been felt by QBE in recent years".

Market Forces said the fact that mainstream fund LSG had co-filed the resolution marked a "hardening of investor attitudes towards companies failing to effectively manage climate risk".

It said QBE had so far made "sub-standard" disclosure on the issue and had "failed" to make a commitment to improve.

QBE said it welcomed the dialogue and would be preparing its response to the resolution in coming weeks.

“It’s widely recognised that a changing climate is giving rise to important issues across the insurance sector," a spokesman said. "Indeed we already have a program of sustainability-related work underway across our business.

"In this context, the matters raised in the resolutions proposed by Market Forces and Local Government Super are important for QBE and its shareholders and we welcome the dialogue."

Risky business

The risks posed by climate change to the insurance industry - and the wider financial system - were highlighted by Bank of England governor Mark Carney in a landmark 2015 speech, in which he noted that the number of registered weather-related loss events had tripled since the 1980s - and that inflation-adjusted insurance losses from those events had surged from an annual average of about $US10 billion in the 1980s to about $US50 billion during the past decade.

Climate change risk among listed companies was a recurring topic at the Australian Institute of Company Directors conference in Melbourne on Thursday, where prominent director Sam Mostyn said it was among the difficult conversations that some boards had not, until recently, been having.

In a major speech at the conference, she said regulators - including the Bank of England's Carney and senior figures at the Australian Prudential Regulation Authority - had been asking "uncomfortable questions" that had opened up "a new conversation about director responsibilities presented by climate-related financial risks".

"If you're not thinking about climate-related risks and you're sitting in a regulated company you're running a risk," said Ms Mostyn, who sits on boards including Virgin Australia, Transurban and Mirvac. "We wouldn't need regulators to tell us this if the right conversations had been happening inside boardrooms, we'd be on to it already."

A 2016 opinion written by Noel Hutley SC found that directors risked breaching their statutory duties if they failed to consider and disclose foreseeable climate-related risks. Meanwhile, institutional investors are becoming increasingly vocal on climate change issues, especially in pushing for companies to boost their disclosure of climate risk along the Task Force on Climate-related Financial Disclosures lines.

Resolving the matter

Passive investment giant BlackRock was among those supporting climate change-related shareholder resolutions at US companies ExxonMobil and Occidental last year.

But BlackRock has not backed Australian climate-related resolutions, with its head of investment stewardship in Asia Pacific, Pru Bennett, telling the AICD conference on Thursday that its own engagement with companies had been followed by "some quite remarkable disclosures and changes in attitude" on the issue.

She said the workload created by shareholder proposals lodged by small groups of investors was "disproportionate" for boards.

Prominent director Ziggy Switkowski, during the same session, said climate change was one of several "important risks and stresses" being faced by companies, also listing political risks, technological shifts and "risks associated with activism and the reinforcement of that through social media".

He said climate risk should be acknowledged and described, but both he and Ms Bennett rejected suggestions that climate disclosure should be mandated.

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