In late 2015, there were a number of significant announcements regarding climate change — including commitments from the Paris Conference of Parties (COP21), the release of the Australian Government’s National Climate Resilience and Adaptation Strategy, and reports from the Bureau of Meteorology (BOM) and the Commonwealth Scientific and Industrial Research Organisation (CSIRO) on climate risk and resiliance. They all pointed to one thing — our climate is changing and urgent steps are required to manage and mitigate the impacts. Even as we look to reduce current and future greenhouse gas emissions, without deep reductions we are already locked into inevitable climate system impacts. The issue is how to manage and mitigate the impacts of climate change when even under a globally binding consensus for action, we will need to plan for a future of climate uncertainanty. This all leads to inevitable uncertainty and challenges for Australian business in determining a response.

1. Let’s talk:
sustainability
Bringing together the latest in EY
sustainability insights and points of view
August 2016 | Issue 7
The rise of big data and implications on privacy
Asking ‘should we?’ not ‘can we?’
Can we create an impact?
Explaining the investment growth of
green and social bonds
The Sustainable Development Goals
What role can companies play?
Adapting to an uncertain climate
A four step action plan for business

2. Let’s talk: sustainability Issue 71
Big Data analytics are
being used to map genetics,
improve social security
services and make better
human resourcing decisions,
but the phenomenal value
of personal data makes it
tempting to disregard the
right to privacy of data
subjects, not least in the
work place. We believe
that it is only a matter of
time until a greater public
understanding of the reach
of Big Data analytics causes a
sizeable social backlash with
potentially serious financial
consequences. To prevent this,
it is urgent for Business and
Government to tackle the
absence of proper legal and
ethical frameworks on the
use of private data, starting
with privacy management
plans in the work place.
The word “privacy” seems to be
everywhere these days. Most
companies or institutions have
a Privacy Policy, which few of
us ever read and most of us
agree to the click of a mouse.
Yet how many of us remember
that privacy is one of our most
fundamental human rights?
How many of us realise that we
are willingly divesting ourselves
of that right, often several times
a day?
Despite recent updates, the law is likely
underequipped to address the potential
threat posed by digital capabilities as the
pace of development and new innovations
increase. As a result, our employers, the
businesses or government agencies that
serve us, and other parties, increasingly
resort to algorithms that use our data to
map and analyse our likes, dislikes and
probable future actions. This information
is then used as a basis for decisions such
as future training opportunities, hiring
decisions or loan approvals.
What are the implications
for employees?
The work place is a particular area
of concern because according to the
“employee records exemption” in Section
7B of the Privacy Act, businesses are not
bound by the usual privacy protections
when it comes to employee data gathered
in the context of an employment
relationship. In other words, your
employer is able to draw datasets that
when subject to analysis provide insights
on, say, your emotional state or intention
to start a family. The danger here is that
the digital behaviour on which these
conclusions could be founded is from
monitoring and surveillance that many
employees are not aware of.
Employers could of course counter that
an employee has agreed to this through
their employment contract, including the
policies in place within the organisation.
But here is the crux of the issue: are
you fully aware of what it is you have
actually agreed to? And, even if you did
understand this in detail, do you feel that
you had any choice in accepting the terms
set out in the contract? Assuming that
the answer to either of these questions
is “no”, then how can this be construed as
informed consent?
The possibilities presented by recent
data analytics advances are not lost on
the majority of users, yet there remains
a blind trust in the benevolence of
technology for those with nothing to hide.
Take, for instance, the recent introduction
of some of the strictest data retention laws
in the world by the Australian government.
Or reports that health insurers will provide
discounts for those policy holders who
agree to share their health tracker data
with their insurer. The general consensus
seems to be that if you have nothing
to hide then sharing your data is not
a problem.
“If data is the new oil,
then analytics is the
new refinery”
Jim Heppelman (CEO of PTC)
The right to privacy is enshrined in
Article 12 of the Universal Declaration
on Human Rights, the basis for all
modern international human rights,
and it is reflected in Australian law
through Federal and state legislation.
The Privacy Act 1988 regulates the
handling of personal information
about individuals, and was updated
in 2014 to include 13 ‘Australian
Privacy Principles’.
The rise of big data and implications on privacy
Asking ‘should we?’ not ‘can we?’

3. ey.com/au/sustainability 2
Growing awareness and, above all,
understanding of the power of data
analytics may cause a conscious
modification of people’s digital behaviour,
or self-censorship, which ultimately
equates to a restriction on the right to
free expression. From there it is a slippery
slope to the dystopian futures that seem
the idyll of science fiction.
Nevertheless, the immense business value
of data means that the urge to monetise
or use data collected will by far outweigh
the risks of infringing on privacy — at
least initially. To date, the existing laws
are unevenly implemented. With only
one instance of a company being fined
in 2013, there has been no significant
litigation in Australia so far. On the other
hand, a Belgian court recently threatened
to fine a social media platform 250,000
Euros per day for tracking non-user
visitors to its website, and last year, the
European Court of Justice struck down
the European Data Retention Directive,
causing the European Union to revisit its
entire data and privacy policy.
What can companies do?
Given all this, it would seem the time is
right for companies to lead on defining
what better practices on data use are.
Rather than joining the gold rush to reap
potentially massive rewards, but risk a
social backlash that would compromise
the beneficial use of big data, companies
would do well to take the lead in fostering
trust among data providers. There is
clear evidence to show that individuals
are willing to give up a measure of
privacy in return for transparency in
how it is used and trust that it is safe.
By undertaking to self-regulate and lay
down a definition for the ethical use of
data, coupled with providing clear and
intelligible information about such policies,
companies can safeguard the rewards of
data analytics without risking the loss of
their social license to operate. Surely this
is something that every employer can see
the sense in.
Freedom
of use
Policies,
assumptions
and
expectations
Ethical
conduct
Monitoring
Compliance
Accountability
Right to be
informed
Privacy
Censorship
Trust
Ownership
of
information
Much of what technology
enables you to do is not
regulated by law, but
ehtical considerations
demand that you pose the
question “just because you
can, should you?”
Data
capability:
what you
can do
Ethics:
what you
should do
The Law:
what you
may do

4. Let’s talk: sustainability Issue 73
Impact investments have
emerged from relative obscurity
just a few years ago to become
a rapidly growing financial
opportunity today. As we move
closer towards our planetary
boundaries, environmental
and social issues will become
increasingly prominent,
requiring more urgent action
from governments, investors,
and corporates.
The increased awareness of
environmental, social, and governance
(ESG) issues is driving global demand for
innovative solutions to these challenges.
Impact investment, in the form of green or
social bonds, are being increasingly used
as solutions.
What is impact investment?
Greens Bonds and Social Pay for outcome
instruments, commonly referred to as
green or social bonds, associate the
proceeds of a bond issue to environmental
or social activities, creating ring-fenced
debt finance for green and/or social
investments.
Impact bonds can take a number of forms
— self issued, corporate, project, and more
exotic hybrids — but their common theme
remains the focussed use of funds raised
by the bond against a defined set of green
or social outcomes. For example, in 2014
a property company issued Australia’s
first green bond, proceeds of which
were invested in green-rated sustainable
buldings and energy, water and waste
reduction projects.1
How are they issued?
Some impact instruments, particularly in
the social space, are being issued under
a new innovative form of payment, known
as Payment by Outcomes. This method of
financing involves an issuer entering in to
a contract with private investors or donors
that supply the project’s up-front costs,
the private investors then hold a separate
contract with the government that pays
out only on the successful delivery of
social or environmental outcomes.
What is the appeal of
impact investment?
In addition to generating positive
outcomes for society and the environment,
impact investments has attracted
significant demand from private investors
through higher risk/return characteristics,
and clear repayment thresholds.
There is also growing acceptance that
the outcomes that many green or social
impact investments deliver may be valued
higher in the future. For example, the
potential upside associated with carbon
abatement technologies should the policy
environment shift globally, may make
investing in green bonds attractive for
longer term investors.
Of course, as with any investment,
such investments carry a degree of risk.
Since investor return is intrinsically linked
to the program’s success, investors must
place their trust in the effectiveness of
the service provider for whom there is
currently no track record. The present
scope of social finance opportunities
is also limited by the metrics on which
performance is based. The ability to
demonstrate an outcome has been
achieved is a crucial factor in outcomes
based payments.
Can we create an impact?
Explaining the investment growth of green and social bonds
Private Investors
Service Provider
Target Population
Social Benefit
Bond User
Private money
Public money
Government
Figure 1 — Impact investment financing process
1. https://www.climatebonds.net/2014/10/stockland-issues-australia%E2%80%99s-first-green-bond-eur300m-us4029m-7yr-rated-15-coupon-proceeds}

5. ey.com/au/sustainability 4
Going forward, a key challenge will be the
integrity of impact investments, both at
issue and over their tenure. Recognising
this need for integrity, the green bond
market has seen the development of the
Green Bond Principles (GBP) and the
Climate Bond Initiative (CBI), which have
established assurance requirements to be
met by green bonds. The social and wider
impact investing market is yet to develop
a similar set of requirements that can be
applied universally, due to the complexity
and range of social and environmental
outcomes.
What is the current state of
the market?
More than US$35 billion in green bonds
were issued worldwide in 2014, a growth
rate of approximately 300% from 2013.
To-date the market has been dominated
by international and supernational
entities such as the World Bank, however
there has been a recent explosion of
involvement from corporate entities,
including large issuances by GDF Suez,
Berkshire Hathaway and ANZ.
The social investment market is in an
earlier stage of development, however
while it is currently significantly smaller
in size, the market is also experiencing
rapid growth. The key difference from the
green bond market is that all issuances
for social investment so far have involved
a government party as a key financial
stakeholder.
What does the future hold?
While the impact investment market as a
whole is still in its infancy, there is great
potential for growth. In the environmental
space, governments and corporates spend
large amounts of money on environmental
aid as well as social aid, meaning the
green bond market could expand into
Payment for Outcome structures which
would provide an additional revenue
stream to green bond structures. In turn
this could open up the possibility of green
bonds being issued on more favourable
terms than similar debt products, which
would immediately attract huge demand.
Recent Green Bonds by ANZ and Westpac,
assured by EY, totalled AUS$1.1bn in
issuances. These landmark green bonds
utilised the Climate Bonds Standard and
incorporated pre- and post-issuance
assurance. This assurance is fundamental
to the integrity of the markets as it
provides greater confidence that the
assets in the bonds meet the standard’s
criteria, and that the funds are flowing to
the right projects.
In the social investment space, one area
of anticipated growth is in International
Aid and Development Assistance, where
$140Bn of aid is invested globally every
year. In an era where donors are looking
for innovation in aid, they are increasingly
looking to business as a partner in
development to help achieve outcomes
like jobs for the poor. If Payment for
Outcome structures were to expand
beyond government financed projects to
address social problems where corporates
or philanthropists currently spend money,
then we may see the same kind of growth
from corporate issuances that the green
bond market witnessed 2013 — 2015.
Newpin Social Benefit Bond
The Newpin program was
Australia’s first social impact
bond, a collaboration between
the NSW Government, Social
Ventures Australia and
UnitingCare Burnside. The
bond, created in 2013, is
a $7 million pilot program
aimed at restoring children
to their families from out-of-
home though creating safe
environments.
Under the Newpin bond,
government provides payments
based on the proportion of
children participating in the
program that are restored to
their families. In the first year
of the bond the Newpin
program had a 60 percent
restoration rate, which under
the bond’s terms delivers a
7.5 percent return, well above
the average of 2.9 percent
for medium-term returns.
Going forward, a 65 percent
restoration rate will deliver
a 12 percent return, and a
70 percent rate will see a
15 percent return.
0 5 10 15 20 25 30 35 40
2007
2008
2009
2010
2011
2012
2013
2014
Other
Financials
Corporate non-financial
Municipalities/ cities
Supranationals
Want to know more?
Click here to download EY’s paper
Impact bonds: What’s behind the
exploding growth in green and social
bonds markets.
Figure 2 — Volume of green bonds
issued ($USbn)

6. Let’s talk: sustainability Issue 75
The Sustainable Development Goals
What role can companies play?
In September 2015, world
leaders from over 190 countries
committed to the Sustainable
Development Goals (SDGs): to
eradicate extreme poverty, fight
inequality, and take action on
climate change by 2030.
The 17 SDGs, which came into effect
on 1 January, are the result of an
inclusive consultation process with
governments, a broad range of NGOs,
business representatives, and ordinary
citizens. Never before have world leaders
agreed on such a far-reaching agenda to
transform our global society.
This is not “just another framework”. The
goals can be described as the world’s most
comprehensive materiality assessment.
They identify the most pressing economic,
social and environmental issues of our
time and lay out a road map for how to
address them.
Unlike their predecessor, the Millennium
Development Goals (MDGs), the SDGs
apply to every single country, not just the
developing world. They are designed to
be implemented by everyone, including
governments, businesses, individuals,
NGOs, and not-for-profits.
There is a threat that the SDGs will be
seen as an issue for developing countries,
where social aspects may need more
dramatic intervention, but developed
countries like Australia have a very
real opportunity to show leadership by
improving sustainability at home. While the
SDGs are interconnected and should be
considered as a package, some will require
more effort than others to be achieved in
Australia. Having a global mindset is very
important in the way we think of the SDGs,
recognising the synergies and trade-offs
between each goal.
In Australia, we suggest that some of the
more accessible goals, where significant
impacts could be achieved, includes
gender equality (goal five), reduced
inequalities (goal 10) to improve fairness,
prosperity and sustainability. Indeed,
we’re seeing corporate Australia strive to
adopt progressive policies and positioning
on aspects like goal five, implementing
targets aimed at gender equality and
representation across levels, with a focus
on the importance of those charged
with Governance.
Of course, that isn’t to say that Australia
can’t also promote global sustainable
development by encouraging actions
such as responsible consumption and
production (goal 12), and reducing
greenhouse gas emissions (goal 13), or
influence the other goals. What will likely
be necessary for significant success,
however, is corroborative action through
engagement between companies and
governments.
The Business Case for the SDGs
In an interdependent, global marketplace
where the private and public sectors
are increasingly interlinked, the SDGs
present an opportunity for Australian
businesses to play a role in global
sustainable development. In fact, without
their engagement it is hard to see how the
SDGs can be successful.
Figure 3 — The Sustainable Development Goals came into effect
on 1 January 2016
The Paris Agreement at COP 21 in
December 2015 signified a historic
commitment to reduce global warming
to well below 2 degrees Celsius. Both
are important milestones in their own
right, but they also mark a transition
to a much greater focus on the role of
business in achieving more sustainable
and responsible growth — through
their own practices and their enhanced
engagement in monitoring and holding
to account government performance.

7. ey.com/au/sustainability 6
Although they are non-binding, they will
likely be highly influential in shaping policy
and finance flows from a range of sources.
A responsible business is one that seeks
to implement sustainability strategies that
advance inclusive economic growth, social
equity and progress, and environmental
protection to deliver long-term value.
The economic imperative for business
to pursue a purpose that goes wider
than shareholder value has been well
documented — given a similar price and
quality product, 84 percent of consumers
would actually switch their normal brand
for one associated with a good cause1
.
In fact ‘meaningful brands’ connected
to human well-being outperformed the
stock market by 120 percent in 20132
.
Eighty-nine percent of EY’s clients believe
a purpose driven company will deliver the
Figure 4 — Practicalities of the SDGs
highest quality products and services3
.
Having a purpose that extends past
shareholder value and into stakeholder
value — such as addressing the SDGs for
the resilience and prosperity of society
and environment — may well generate long
term returns that outperform the market.
Businesses that wish to show leadership
can integrate the SDGs into strategies,
investments, and business models,
providing them with a competitive
advantage in a changing landscape.
Australian regulation, including the
Australian Stock Exchange (ASX) and
Australian Investment and Securities
Commission (ASIC), increasingly require
companies to report on not only economic
but also environmental and social
sustainability risks.
In addition, investors are progressively
adopting more structured, measurement-
oriented approaches to non-financial/
ESG information. The SDGs represent an
opportunity for businesses to demonstrate
their role and contribution in the global
sustainability agenda while in parallel
articulating a broader purpose.
Map the SDGs and targets
to areas of strategic
relevance for the business
Identify collaboration partners
to support delivery of goals
Develop framework to build
business case to support
prioritisation
Collaborate
Prioritise
Assess
Identify outcomes, develop
KPIs, measure progress
Measure
Understand
the goals and
implications for
key stakeholders
and markets
Understand
What do the global goals
mean for me?
Regardless of your industry sector,
the SDGs are relevant for you. With
collective responsibility, the premise is
to consider your own business risks and
opportunities in the context of the global
sustainability agenda.
There is a significant business
opportunity to align your strategic
priorities with global priorities in order
to deliver long term economic, social,
environmental and ethical value.
As the SDGs represent the future of
the sustainable development agenda,
alignment and advancement are the key
prospects of recognising early-adopter
advantages. If we do not collectively
address the challenges outlined in the
SDGs, there may not be any business to
conduct. With high levels of buy in from
a range of international organisations,
the SDGs represent the new benchmark
for companies. Considering the global
sustainable development agenda will
provide insights into future business
innovation opportunities to mitigate risks.
The SDGs paint a picture of an ideal
world — a world with no poverty,
education for all, economic growth,
resilience, protected ecosystems and
collaboration. Achievement of the SDGs
by 2030 will not be easy, but awareness
of our challenges is the first step towards
managing them. Momentum is gaining,
the decision is whether to affect change,
or be effected by it.
1. http://www.conecomm.com/2015-global-csr-study-press-release
2. http://www.meaningful-brands.com/
3. http://www.ey.com/GL/en/Services/Advisory/EY-purpose-led-transformation-benefits-and-examples

8. Let’s talk: sustainability Issue 77
In late 2015, there were
a number of significant
announcements regarding
climate change — including
commitments from the Paris
Conference of Parties (COP21),
the release of the Australian
Government’s National Climate
Resilience and Adaptation
Strategy, and reports from
the Bureau of Meteorology
(BOM) and the Commonwealth
Scientific and Industrial Research
Organisation (CSIRO) on climate
risk and resiliance.
They all pointed to one thing — our climate
is changing and urgent steps are required
to manage and mitigate the impacts.
Even as we look to reduce current and
future greenhouse gas emissions, without
deep reductions we are already locked
into inevitable climate system impacts.
The issue is how to manage and mitigate
the impacts of climate change when even
under a globally binding consensus for
action, we will need to plan for a future
of climate uncertainanty.
This all leads to inevitable uncertainty
and challenges for Australian business
in determining a response.
Our changing climate
2015 was Australia’s fifth-warmest year
on record, according to the BOM’s 2015
Annual Climate Statement1
, with the
annual national mean temperature
0.83 °C above average.
Climate projections released by Australia’s
CSIRO in 2015 indicated that Australia has
been warming and will warm substantially
during the 21st century.
The CSRIO report presents that:
•• Average temperatures will continue to
increase and Australia will experience
more heat extremes
•• Extreme rainfall events are likely
to become more intense
•• Southern and eastern Australia
are projected to experience more
extreme fire-related weather
•• Drought periods are projected to
increase over southern Australia
•• Sea levels will continue to rise
throughout the 21st century
with increased frequency of
storm surge events
•• Oceans around Australia will warm
and become more acidic
The impacts of our
changing climate
The changes to our climate will inevitably
impact all Australian’s — businesses,
government and households — through the
potential for damage to assets; disruption
to power, water, telecommunications
and transport; disruption to supply
chain and operations; reduced reliability
and increased cost of primary goods;
increased cost of water and electricity;
safety risks; and increased insurance
costs and changes in policy coverage.
According to the Global Climate Risk Index
20152
, Australia already has the third
highest cost of losses per GDP (0.27%)
from extreme weather events of the top
20 OECD countries.
Responding to the challenge
Global response
As a result of COP21, held in December
2015, the world agreed to a collective
ambition to limit temperature increases
to 2°C above pre-industrial levels, with
an aspiration for even greater action.
However, currently proposed national
contributions are not yet consistent with
this goal: instead, they would result in
a long-term global temperature rise of
2.7– 3.9°C. But even a 2°C change
would require Australia and the region
to manage substantial adaptation
challenges.
Australian Government’s response
In December 2015, the Australian
Government released its National Climate
Resilience and Adaptation Strategy. The
Strategy sets out how the government will
manage climate risks for the benefit of the
community, economy and environment.
It identifies a set of principles to guide
effective adaptation practice and
resilience building, and outlines the
Government’s vision for the future
(Figure 5).
The way forward
To build adaptive capacity, EY has
identified four key cross-organisational
areas for businesses to consider in
responding to the physical impacts of
climate change on their assets, operations
and suppliers. These are outlined on pages
9 and 10.
Adapting to an uncertain climate
A four step action plan for business

9. ey.com/au/sustainability 8
Importantly, the National Climate Resilience and
Adaptation Strategy identifies that governments at
all levels, businesses, communities and individuals
have different and complementary roles to play in
building our resilience to climate change.
As owners of much of the physical assets and
infrastructure at risk from the impacts of climate
change, business will need to collaborate with
Government to engage in adaptation planning
and implementation.
1. http://www.bom.gov.au/climate/current/annual/aus/#toc2
2. Kreft, S., Eckstein, D., Junghands, L., Kerestan., C & Hagan, U. 2015, Global Climate Risk
Index 2015, Germanwatch. The Global Climate Risk Index developed by Germanwatch
analyses the quantified impacts of extreme weather events including the insured damages
and economic losses that occurred based on data from the Munich Re NatCatSERVICE.
Figure 5 — Guiding principles for climate change adaptation
Shared
responsibility
Collaborative,
values-based
choices
Assist the
vulnerable
Factor climate
risk into
decisions
Revisit decisions
and outcomes
over time
Evidence-based,
risk management
approach
Apply the best
available science
Support those
who are vulnerable
to disaster risk and
climate change
Consider the
current climate
and future change
in all our decisions
Governments at all
levels, businesses,
communities and
individuals all have
important roles
to play
Review actions
regularly, look for
flexible choices and
opportunities
Respect the
knowledge and
experience of
those affected,
and involve them in
decision making
The four key steps on pages 9 and 10 can be aligned
with the principles of the National Climate Resilience
and Adaptation Strategy, to guide effective adaptation
practice and resilience building. They can be used
to engage leadership in developing an adaptation
response that is embedded across the business.
The result will be a business that understands
interdependencies, enhances its adaptive capacity,
forges partnerships with key stakeholders, and is more
capable than its competitors of dealing with uncertainty
and extreme climate change related events.

10. Let’s talk: sustainability Issue 79
When assessing physical climate risk and vulnerability,
businesses should consider the following climate-specific
factors:
•• Inherent levels of uncertainty in climate projections
(e.g., temperature, rainfall, wind) based on scale,
timeframe, climate impact and available data
•• Risk changing over different time horizons (such as 2030
or 2050), and with consideration of the level of global
mitigation action being taken
•• Coverage of the risk and vulnerability assessment to
ensure all material elements and assets of business
operations are assessed including supply chain
•• Variation in impacts to assets depending on location,
topography, and the standard to which they were built —
a risk map incorporating the best available climate change
and asset data can be a useful tool for exploring vulnerability
Reflecting the need to consider these factors within business
risk processes, the Australian Standard AS 5334-2013
provides a framework for climate change adaptation for
settlements and infrastructure based on the international
standard for risk management, ISO 31000. By assessing
physical climate risk, businesses can prepare to engage with
insurers and other stakeholders.
Assess your risk and vulnerability Develop an adaptation plan
3. Net Balance Foundation and CDP, 2014, Disclosures on climate risk: A review of ASX top 200 companies,
http://www.netbalance.com.au/our-reports/2014/9/30/disclosures-on-climate-risk
4. CDP. 2015, CDP Global Climate Change Report 2015.
5. Chamber of Commerce and Industry Queensland. 2015, Queensland Business Insurance Report.
6. http://www.insurancecouncil.com.au/assets/files/community%20resilience%20policy%20150408.pdf
Following the risk assessment, businesses may choose to
develop a strategy outlining adaptation actions. The following
are steps businesses should take to ensure their response to
physical climate risk is robust and flexible:
•• Embed climate change adaptation into key planning
processes and policy documents
•• Incorporate physical climate risks into the enterprise risks
management framework
•• Use the best available climate data for the business’
operating region and update regularly
•• Undertake scenario planning for a range of climate futures
and over multiple planning horizons
•• Collaborate with stakeholders, particularly where
there is a dependent or inter-dependent relationship
(e.g., telecommunications, power and water utilities)
•• Favour flexible solutions that can be adjusted as
circumstances or information changes
This would suggest there is much work to do as we move
towards a two degree future. A 2014 report showed that
Australian companies disclosing climate risk information were
mainly at the stage of developing climate adaptation plans,
rather than implementing or refining actions3
.
This would suggest there is much to do as we move toward a
2 degree future.
A four step action plan to tackle
climate change adaptation
1 2

11. ey.com/au/sustainability 10
Disclose your risks and initiatives Talk to your insurers
There is growing demand from investors for information
on climate risk; CDP notes a 54% increase in institutional
investors requesting climate change, energy and emissions
disclosures, including adaptation information, since 20104
.
Standards have been developed to help businesses report
on their climate change activities more consistently:
•• The Global Reporting Initiative’s disclosure G4-EC2 covers
financial implications and other risks and opportunities
for the organisation’s activities due to climate change
•• The CDP questionnaire asks for information on risks
and opportunities driven by changes in physical climate
parameters (e.g., temperature, cyclone, precipitation,
sea level rise)
•• The Climate Disclosure Standards Board’s Climate Change
Reporting Framework includes indicators on climate risks,
opportunities, management actions, future outlook
and governance
•• The new ASX Corporate Governance Principles asks
listed companies to disclose whether they have any
material exposure to economic, environmental and social
sustainability risks and, if they do, how they manage
those risks
As interest from investors, boards and the public grows,
listed companies can expect increasing expectations related
to climate disclosures.
Typically, insurance policies provide protection to business
against potentially large losses. In theory, insurance rewards
businesses that have implemented loss reduction measures
by lowering their premiums.
However, the impact of changing climate patterns and scale
of damages resulting from extreme weather events due
to climate change require changes to insurance products
in relation to the determination of the price of risk-based
premiums, and coverage and tenure of insurance policies.
Depending on the tax and accounting systems in place, and
the insurance options available, businesses can increase their
adaptive capacity through self-insuring and outsourcing some
or all elements to a third party insurer. Key considerations for
businesses include the following:
•• Self-insuring businesses need to fully understand the risks
of climate change to their assets, supply chains and staff
•• Businesses using third-party insurance need to consider
rising costs as insurance and reinsurance companies
account for increased physical climate risk (e.g., Queensland
businesses have seen an average increase in premiums of
58.2% for their most recent renewal5
)
With 19 of the 20 largest insurance property losses in the
previous 40 years in Australia having been weather related6
,
insurance is likely to become an increasingly important
component of business response to physical climate risk.
3 4

12. ey.com/au/sustainability 11
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About EY’s Climate Change
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Climate change and sustainability continue to rise
on the agendas of governments and organisations
around the world with rapidly evolving drivers
and expectations. Your business faces regulatory
requirements and the need to meet stakeholder
expectations as well as respond to the opportunities
presented for revenue generation and cost
reduction. This means a fundamental and complex
transformation for many organisations and the
embedding of climate change and sustainability
into core business activities to achieve short term
objectives and create long-term shareholder
value. The industry and countries in which
you operate as well as your extended business
relationships introduce additional complexity,
challenges, responsibilities and opportunities. Our
global, multidisciplinary team combines our core
experience in assurance, tax, transactions and
advisory with climate change and sustainability
skills and deep industry knowledge. You’ll receive a
tailored service supported by global methodologies
to address issues relating to your specific needs.
Wherever you are in the world, EY can provide the
right professionals to support you in achieving your
potential. It’s how we make a difference.
Ernst & Young ABC Pty Limited
(ABN: 12 003 794 296); Australian
Financial Services Licence No: 238167
© 2016 Ernst & Young, Australia.
All Rights Reserved.
APAC no. AUNZ00000646
S1629294
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