Last month, Australians were treated to a rare perversion in the climate change narrative: a global coal miner — Australia’s largest — succumbing to shareholder pressure and announcing it would cap its global coal output.

For many the headlines were sweet, perhaps signalling a pivotal moment in the fight against fossil fuels.

For others it was another multinational corporation acting in self-interest. The company in question was, after all, Switzerland-based Glencore, known for, among other things, evading US sanctions, avoiding tax, and most recently, using a secret multi-million-dollar project to bolster support for coal.

But Glencore didn’t come to the decision on its own. It was, of course, about money — US$33 trillion to be precise.

The company had been dragged to the table by a new corporate citizen: a global collective of investment funds worth US$33 trillion, called Climate Action 100+, who say they want to use their size and power to make the world’s biggest emitters take “real action” on climate change.

The group, which includes some of Australia’s biggest super funds, represents a global push by investors to take climate matters into their own hands.

The move comes as corporate Australia is being forced to rethink its approach to climate change, with the Reserve Bank Deputy Governor Guy Debelle calling for immediate action to avert an “abrupt, disorderly” economic transition, in a speech that confirmed climate change policy as one of the bank’s key priorities.

Accounting bodies are also putting pressure on companies to include climate risk as a “material” item on their financial statements. 

But investor groups like Climate Action 100+ are not interested in coal mine closures, or divestment. Instead, they want to engage with companies to address climate change risk.

So how is business responding to this new world order, and what if anything has changed?

Power in numbers

Investors are now banding together on the issue of climate change, much the way they did in the past over tobacco.

Climate Action 100+ was set up in December 2017 and includes Australian investment funds AMP Capital, AustralianSuper, Cbus and BT Financial Group. The group says investors have run out of patience with politicians.

“We’ve really seen a bit of a shift happen in the last few years,” says Emma Herd, chief executive of Investor Group on Climate Change, which helped establish the global group. “Investors have realised that inaction in Canberra is no excuse for inaction in the boardroom.” 

The group has given itself five years to target a hit list of big global emitters, including Australian firms, and demand they align their practices with the Paris Agreement.

“We know that there is a window over the next few years to really accelerate action on climate change to meet the Paris Agreement,” Herd says.

Dan Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility, says the creation of a united front for investors to tackle climate change is a game changer.

“They’ve got very clear demands, and are setting clear milestones,” he says.

But he says the funds need to do more than just threaten divestment — they need to have a clear strategy to take their members’ money elsewhere if the big miners don’t deliver on their promises.

“The question for us longer term is, what’s the approach if companies don’t deliver?”

Risky business

While investors are playing a crucial role in forcing big emitters to take action on climate change, they’re not the only thing driving change.  Major companies like Glencore are backing away from coal because of broader commercial threats.

Coal is facing numerous economic headwinds including reduced demand, a changing regulatory landscape and tougher access to capital. This makes investing in coal a risky business, which super funds in particular can’t ignore. Indeed, analysts have pointed out that companies as big as Glencore stand to benefit from setting coal production limits, with tighter supply meaning more lucrative prices.

Lobby groups in the crosshairs

Another factor that could tip the scales towards increased climate action from business is that investors want mining companies to rip up their memberships with pro-coal lobby groups.

This has prompted Glencore to say it is considering quitting the Minerals Council of Australia. The MCA has already been forced to revise its stance on climate policy after BHP threatened to leave the group over its pro-coal advocacy in late 2017.

Policy groups say the business lobbies are becoming increasingly disconnected from their members on climate change.

“When you’ve got very loud voices arguing against renewables, saying it’s too costly to transition, and even standing against basic things like vehicle emissions standards, no policy evolves,” Gocher says.

They also believe lobby groups are undermining individual company commitments on climate change. Rio Tinto, for example, went fossil-fuel-free last year, but still holds leadership positions at lobby groups that have opposed climate legislation.

“Many companies now have a policy on climate change and some sort of plan to reduce their emissions,” Jeanne Martin, senior campaigns officer at UK group ShareAction says.

“However, we need to make sure that these new commitments are not merely greenwashing, but showcase a genuine intention by companies to take steps to align their business models with the goals of the Paris Agreement.”

Soul searching

While denialism may have fallen out of favour in the mining sector, even the biggest players in the industry are still working out where they stand.

BHP executive Mike Henry said in public comments last week that he was a “big believer” in the need to address climate change, despite being in charge of the company’s vast coal assets.

“I don’t believe those two positions are irreconcilable,” he said.

Soul searching is also going on at the super funds, with more funds expected to join the Climate Action 100+ group in coming months.

“We know that by targeting the biggest globally systemic emitters we can have an impact,” Herd says.

“These companies are present in most global investor portfolios. They are global, systemically significant emitters. It’s really about galvanising action in a concentrated period and having an urgency about climate change.”

This piece is part of our dedicated climate change series, Slow Burn. Read the rest here.

Will changing business mentality be enough to convince governments to take action? Let us know your thoughts at boss@crikey.com.au.