Climate risks are increasingly a focus for Australian regulators — and lawyers — but eight months after Stockhead first looked at affected agriculture stocks, little has changed in how they approach the issue in terms of talking to shareholders.

Only two, agribusiness supplier Ruralco (ASX:RHL) and fish farmer Tassal (ASX:TGR), identify the results of climate change as a key risk and outline their efforts to mitigate those effects.

Hemp grower Elixinol Global (ASX:EXL) says it’s a risk, but not how they plan to deal with it, while hemp rival EcoFibre (ASX:EOF) and opioid poppy grower TPE Industries (ASX:TPI) only mention “weather” risks.

Since Stockhead’s last tally of 27 key agriculture stocks in September 2018, 14 have reported being affected by dramatic climatic conditions or “unseasonable weather”, or have noted climate change as a risk.

Five are benefiting from dramatic weather or climate change.

These are the agriculture companies Stockhead keeps an eye on for which climate change could be (or already is) an issue. 

ASX code Company Price May 20 6-month price change Market Cap
AAC AUSTRALIAN AGRI $1.11 -11% $672.1M
ABT ABUNDANT PRODUCE $0.06 -75% $3.5M
AS1 ANGEL SEAFOOD $0.19 36% $25.1M
BGT BIO-GENE TECH $0.12 -20% $15.5M
DBF BROADACRE FARMS $1.38 -0.1 $59.7M
CSS CLEAN SEAS SEAFOOD $0.96 -19% $79.3M
ELD ELDERS $6.58 -9% $768.1M
EVE EVE INVESTMENTS $0.01 -0.38 $11.9M
EXL ELIXINOL GLOBAL $5.23 1.62 $652.9M
EOF ECOFIBRE (listed in March 2019) $2.17 - $671.3M
FOD FOOD REVOLUTION $0.09 -0.48 $45.8M
GNC GRAINCORP $7.94 0.055 $1.8B
HUO HUON AQUACULTURE $4.62 0.01 $403.5M
JJF JIAJIAFU MODERN $0.05 -0.63 $4.3M
MCA MURRAY COD AUST $0.17 -0.16 $74.3M
MRG MURRAY RIVER ORG $0.08 0.025 $35.6M
NUF NUFARM $4.53 -0.24 $1.7B
NZK NEW ZEALAND KING $2.35 -0.04 $325.6M
OGA OCEAN GROWN ABALONE $0.16 -0.06 $27.9M
RHL RURALCO $4.41 0.39 $465.4M
RIC RIDLEY CORP $1.33 -0.08 $407.9M
ROO ROOTS SUSTAINABLE $0.09 -0.61 $5.8M
SFG SEAFARMS GROUP $0.09 -0.04 $180.7M
TGR TASSAL GROUP $4.89 0.18 $870.8M
TPE TPI ENTERPRISES $1.22 -0.024 $98.9M
WLD WELLARD $0.05 0.02 $23.9M
WOA WIDE OPEN AGRI $0.115 -0.18 $8.1M
Wordpress Table Plugin

It’s a hard life for a small cap

The problem all Australian company directors are facing with climate change disclosure is that corporate cop ASIC says it’s a risk which now needs to be outlined for shareholders.

Furthermore, key legal minds say they could be personally liable for negligence and breaching their duty of care if climate change risks aren’t factored in.

In March, Noel Hutley QC updated his landmark opinion from 2016 on climate change legal risks. Hutley and Sebastian Hartford Davison say individual company directors are increasingly exposed to climate change litigation.

But it’s also a very new, very opaque area.

At ASIC’s annual regulator get together last week, Citi’s head of ESG research Zoe Whitton says we’re a long way off having a financial report-like system of presenting climate change risk to investors.

The oil and gas industry, however, is likely to have a usable system in the next few years as it’s been on the frontline for climate risk for longer than those, such as retail, which may only just feeling the effects.

Furthermore, it’s a lot of work.

BHP (ASX:BHP) vice president of climate change Dr Fiona Wild says they favour a “scenario analysis” system, which covers physical risk from temperature changes to sea level rise and transition risk looking at societal expectations, insurance costs, and how to deal with a mass market transition, such as the shipping industry’s move to low-sulphur fuel oil.

But even at a $182bn company like BHP it’s tricky, as different people have different time frame expectations and the nature of the risk, and opportunity, are very broad.

Add the fact that Australian investors, albeit coming around to the idea that companies have to start thinking about the issue, are the “shoutiest” of any jurisdiction in the world against doing so, and it’s not an easy task.

When climate change is a bonus

Weather is not climate change, but the latter can and will affect the former. Already fish farmers are noting the effects of higher sea temperatures on their stocks.

But a handful of companies are actually set to benefit from long term changes in temperature and weather.

Animal feed maker Ridley Corp (ASX:RIC) has benefited from the drought ravaging the eastern states, saying a “favourable dry season” as farmers had to feed out more helped profitability.

Abundant Produce (ASX:ABT) said this year their proprietarily-bred tomato and cucumber seeds were proving hardy in extreme cold and hot temperatures in Australia.

Roots (ASX:ROO) and Roto-Gro (ASX:RGI) are both selling either temperature controlled or indoor growing equipment.

And Bio-Gene (ASX:BGT) is selling a new type of insecticide effective on insects spreading into new parts of the world as temperatures permanently change.

Murray River Cod (ASX:MCA) is still at risk, but the fact that they grow their fish in ponds (not the Murray River, as panicky investors feared during the drought-induced ‘fish kills’), and have separate, long term water agreements to feed those ponds provides some protection from climate risk.

When climate change is very much a negative

Fish farmers Huon (ASX:HUO), which is based in Tasmania, and New Zealand King Salmon (ASX:NZK), based in the Marlborough Sounds in the South Island, have both warned that a rise in sea temperatures seen last year have continued this summer, causing problems with fish deaths and breeding.

NZ King Salmon has already fast-tracked a breeding program they didn’t expect to need until 2045.

Ocean Grown Abalone (ASX:OGA) would only admit to “unseasonal weather conditions” in the half-year report, which caused large oceanic swells which prevented divers from harvesting the shellfish.

Beef farmers Australian Agricultural Company (ASX:AAC) and Wellard (ASX:WLD) were both affected by the “once in 100 year” floods in Queensland, as was Elders (ASX:ELD) which, alongside Graincorp (ASX:GNC) and Nufarm (ASX:NUF), also had to deal with the drought further south.

None linked the dramatic weather to climate change.

Grain farmer Duxton Broadacre (ASX:DBF) chairman Ed Peter came as close as he could to allocating blame, saying:

“This season we have witnessed the lowest Autumn rainfall across South Eastern Australia since the 1902 Federation.”

Or, the driest season in 116 years in what is already a low-rainfall region.

The remaining stocks on Stockhead’s list have not mentioned weather or climate risks at all since we last checked in.

 

At Stockhead, we tell it like it is. While Roto-gro is a Stockhead advertiser, it did not sponsor this article.

 

Featured Companies

You might be interested in