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Net zero commitments in ASX200 companies doubles

Net zero commitments are now the norm for Australian companies with $1.59 trillion or 70% of the ASX200's collective market capitalisation adopting them.

Australian Council of Superannuation Investors' Promises, pathways and performance report details climate change disclosures in the ASX 200, revealing the underlying number of companies with net zero commitments has almost doubled on last year.

Since March 2021, the figure has risen from 49 to 95 showing significant improvement.

The report states that two-thirds of the ASX200 has set at least one emissions reduction target.

"Companies without emissions reduction targets are now outliers and will be under increasing pressure to establish sector relevant targets," it said.

In addition to those with a net zero commitment, ACSI found 55 companies were already carbon neutral or had set carbon neutrality targets which is up from 18 last year.

In the materials, energy and utilities, industrials, healthcare, real estate, financials and consumer discretionary sectors, 38 companies integrated sector relevant climate change metrics into their executive remuneration.

The report said utilities, real estate, consumer staples, materials, energy and industrial sectors are leading the way on net zero targets.

ACSI further reported that 29 companies disclosed using a shadow carbon price in decision making, the vast majority (27) of them in the ASX100.

"With no national price on carbon, this result is significant, demonstrating that global movements and regulation around carbon make it increasingly important for companies to price carbon into their decision making," ACSI said.

It added that most companies are now adopting and disclosing against the Task Force on Climate Related Financial Disclosures (TCFD), with 103 either fully or partially aligning their disclosure to the framework.

"More than half of the ASX200 (103) now align climate disclosure to the TCFD framework, an annual average growth rate of 82% since the TCFD's inception in 2017," ACSI said.

This includes many companies in higher risk sectors - 83% of energy and utilities, 60% of industrials and 75% of materials.

"This is a dramatic lift in adoption as when the TCFD framework was first established in 2017, only 11 companies used it. The high rate of adoption by higher risk sectors.," the report reads.

However, key challenges remain for companies in strengthening the standard of reporting so investors can adequately assess how strategies are aligning with the Paris Agreement goals.

Investors are often faced with inconsistent, incomplete, incomparable and unverifiable information within scenario analysis, ACSI said.

When assessing a comprehensive transition plan, investors are generally looking for companies to demonstrate the plan is credible, ambitious and is backed by real action.

Read more: ASXACSITCFDParis Agreement