![A bushfire on the south coast of NSW in 2019. A new report has found many government-owned corporations are not considering the risks of climate change to their businesses. Picture by Dion Georgopoulos A bushfire on the south coast of NSW in 2019. A new report has found many government-owned corporations are not considering the risks of climate change to their businesses. Picture by Dion Georgopoulos](/images/transform/v1/crop/frm/36i7SKuzkApKRqnK2hWiW9n/fccaa278-e25a-46ce-9d41-bf47c75738ac.jpg/r0_435_4256_2828_w1200_h678_fmax.jpg)
Ministers should direct government-owned corporations to consider the risks of climate change to their businesses - and audit offices should scrutinise how well the publicly-owned entities carry out the task, a new report from an independent think tank says.
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The Centre for Policy Development recommended the actions after finding nearly two-thirds of annual reports from Commonwealth- and state-level government-owned corporations it studied did not mention the financial risks of climate change.
Public entities were lagging private sector companies in assessing, managing and reporting the risks climate change posed to their businesses, the new paper said.
The report, released on Wednesday, found the vast majority of publicly-owned companies had not started thinking about the financial risks of climate change.
Many of the government-owned corporations were in critical and climate change-exposed parts of the economy - including water utilities companies, electricity companies, or investment funds supporting the retirement of public servants.
Report author Arjuna Dibley said there were potentially major public consequences if the government-owned corporations didn't manage the risks properly.
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"These companies are involved in areas of the economy that tend to be quite networked industries, and they're delivering public goods and services - electricity generation, managing investments, delivering water services," he said.
"And so the big consequence here [if] they don't manage the risk properly is that it will have flow-on effects across the economy.
"Because they're owned by governments, they're really held by all of us, as members of the public. So if government-owned companies don't manage climate change and its financial impacts properly, we all bear the consequences of that."
An analysis of annual reports from 2021 showed while many public authorities were discussing climate change, this was often limited to general statements about its significance or its broad impact on their sector.
This put them behind the private sector, where the level and sophistication of climate change risk management had grown in the past decade, the report said.
"This has been led, in large part, by investors who demand better disclosure," it said.
The public sector had been insulated from this trend, because it reported to ministers rather than investors or financial markets, the study found.
One result was "significant inconsistency" in the way governments and their authorities were considering the risks posed by climate change.
"As more investors, companies, and governments take action to respond to climate change, we can expect growing scrutiny on public authorities to manage climate-related risks," the paper said.
Among recommendations was that ministers give clear directions that required the public entities to evaluate climate change risks and set climate-related goals.
"For public authorities, the most significant oversight will come from the authority's shareholding minister," the report said.
"It is important that ministers provide clear expectations to government-owned corporation directors regarding how climate risks should be meaningfully addressed, accounted for and managed."
Audit offices could also use their powers to carry out performance audits investigating how government-owned corporations were approaching climate risk, the report said.
The Centre for Policy Development said that the new Labor government had taken steps to understand and manage its public sector exposure to some climate risks, signalling an intent to introduce mandatory climate risk disclosure requirements.
The think tank's report also said it expected the small number of entities conducting climate change risk analysis, management, and reporting to grow in light of recent commitments from state and federal governments.