ESG Focus: The Little Big Things – 09-10-2025

This story features AGL ENERGY LIMITED, and other companies.
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FNArena's dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future: 
https://www.fnarena.com/index.php/financial-news/daily-financial-news/category/esg-focus/

Little Big Things focuses on some of today’s biggest ESG issues, including the new government reduction target, transition action plans, corporate safety records and more.

-Progressing to new emission reduction target
-Utilities’ energy transition plans
-Corporate ESG updates
-Corporate safety records
-EU’s carbon tariff
-Bio-stimulants

By Greg Peel

Assessment and Target

Following Australia’s first National Climate Risk Assessment and the government’s subsequent 2035 emissions reduction target of -62-70% below 2005, Westpac reports plans are taking shape for a nationwide scheme to recycle and reuse solar panels, new thinking on generating financial and environmental returns in the construction industry, plus a grant to promote consistency across the agricultural sector, and more.

Solar: Commonwealth, state and territory governments have come together to progress the first national solar panel reuse and recycling scheme. The scheme aims to direct solar panel waste from landfill towards re-manufacture or recycling.

NSW, which is currently developing a mandated stewardship program for batteries, will work with other jurisdictions to create a Regulatory Impact Statement, while the Commonwealth will work with states to test and validate a national product stewardship scheme. All parties have agreed to report back on progress in early 2026.

The Pilbara: Could a global hub for mineral and energy resources be transformed into a renewable energy powerhouse? A new report commissioned by the Clean Energy Finance Corp shows a shared transmission model for the Pilbara region has potential to significantly cut emissions while also driving economic and environmental benefits.

The report explores the benefits of a Common User Transmission Infrastructure (CUTI) system, which would enable multiple users and generators to connect to a single, shared grid. The CUTI system would replace the traditional model, where each miner builds and operates its own infrastructure, and would be a key facilitator of the renewable electricity transition.

Agriculture: Consistency of farm-level greenhouse gas emissions calculators looks set for improvement with Agricultural Innovation Australia receiving a $6.4m federal government grant to help farmers and agricultural businesses estimate emissions from on-farm activities, such as those from livestock, manure management and nitrogen fertiliser.

Construction: A German technology company is taking an innovative approach to circularity in the construction industry. BetaPort Systems is pioneering a building model in which modular timber components are used to generate financial returns for investors. 

Under the company’s Beta Finance model, building components such as facades, beams and staircases are designed to last for more than 80 years, and this longevity positions them as assets of financial value. Every element is digitised and assigned a material passport, so its history can be traced from production to reuse.

Returns for investors come in the form of income generated during use, reuse across multiple projects and residual value at the end of the component’s lifecycle.

Climate Transition Action Plans (CTAP)

Morgan Stanley believes AGL Energy’s ((AGL)) decarbonisation task is the largest among Australia’s utilities and its emissions reduction and clean energy investment targets are the most ambitious, both in absolute terms and relative to company size.

Origin Energy’s ((ORG)) reduction targets exclude the impact of new gas fields, should Origin reach final investment decision (FID) on new projects. AGL’s generation intensity targets have not been met to date. The company plans to develop new gas-fired generation which would then require additional renewables investment to lower generation intensity.

APA Group ((APA)) has similarly backslid on its generation intensity targets.

Scope 3 (end-user) reduction targets for energy suppliers remain difficult to specify, in Morgan Stanley’s view, as they are akin to revenue reduction targets. AGL’s proposed FY36 Scope 3 target relies on coal closure and grid intensity reductions which lack additionality, but to be fair, says Morgan Stanley, AGL also targets abatement from electrification.

Origin’s clean energy investment target of 4-5GW of renewables and storage by FY30 includes a starting position of 1.8GW as of FY24, so equates to 2.7GW incremental investment, versus AGL’s 4.8GW incremental investment over the same period.

When considering energy security, Morgan Stanley estimates AGL’s and Origin’s closure versus investment plans leave the National Electricity Market short, but to be fair, policy auctions are incentivising supply, and Origin also makes a material contribution to East Coast domestic gas markets.

AGL’s largest shareholder (10%-plus), Mike Canon-Brookers’ Grok Ventures, refused to endorse the company’s updated CTAP at last week’s AGM, labelling it as inadequate, the SMH reported. Grok said AGL’s commitments were “largely unchanged” from two years ago and fall short of the Paris Agreement target.

Grok’s votes accounted for the majority of proxy votes that opposed the CTAP, while 70% of votes supported it.

Origin’s second CTAP sets out a comprehensive framework for decarbonising its operations, Jarden reports, reaffirming the company’s ambition to achieve net zero Scope 1, 2 and 3 emissions by 2050. The 2025 plan builds on Origin’s 2022 strategy and reflects both progress and challenges of Australia’s energy transition and will be subject to an advisory shareholder vote at the company’s upcoming AGM.

Origin’s CTAP maintains the medium- and long-term climate targets first set in 2022: a -40% reduction in equity emissions intensity and a -20Mt absolute reduction by 2030 (from an FY19 baseline), and net zero emissions by 2050.

While the plan outlines areas of progress, delivery remains highly dependent on several factors, Jarden notes, including Eraring power station’s closure, the speed of renewables and transmission build-out, and customer and partner progress on Scope 3 emissions.

ESG Updates

BHP Group ((BHP)) has held an ESG roundtable and South32 ((S32)) a CTAP briefing, while Fortescue ((FMG)) has released its CTAP.

BHP is seeing solid progress on Scope 2, Macquarie reports, however, diesel displacement remains a challenge, with battery electrification the preferred option.

South32’s operational decarbonisation is focused on aluminium (over 90% of operational emissions). Fortesuce’s CTAP includes a slight change in the time frame on real zero target to 2030-31 from 2029-30, more focus on cable electric solutions, and reduced mentions of green hydrogen.

There has been some momentum on sustainable aviation fuel (SAF), through the Western Australian government’s $1.1bn investment. The International Air Transport Association expects SAF to represent 0.7% of jet fuel in 2025. Qantas Airways ((QAN)) has a target for 10% SAF in its fuel mix by 2030, increasing to 60% by 2050, however, Macquarie suggests Australian SAF mandates likely need to see significant uptake.

Moving to the ‘S’ in ESG, the Federal Court has found Coles Group ((COL)) and Woolworths Group ((WOW)) underpaid around 30,000 salaried managers over several years.

Woolworths estimates additional remediation costs could reach -$530m (-$331m previously paid), while Coles estimates remediation at -$150-250m (-$31m previously paid). A further hearing is scheduled for October 25 to determine compensation for affected employees.

And to the ‘G’, the UN’s first AI Governance meeting was held at the recent General Assembly with all 193 UN Member States to consider effective global AI governance given no global frameworks.

Two new bodies were introduced, Global Dialogue on AI Governance and Independent International Scientific Panel on AI.

Notably, points out Macquarie, the US delegation pushed back on the idea of centralised AI governance.

Safety

Over the FY25 period to date, 16 fatalities have been reported across ASX200 industrials, retail, mining and oil & gas companies, down from 19 in FY24, with the majority occurring in the mining and industrials sectors.

While the FY25 dataset is not yet complete, early trends suggest some improvement, Jarden notes, with leading safety indicators generally moving in the right direction among companies that report them.

At the same time, recordable injury outcomes have shown positive progress, with the Jarden-calculated Total Recordable Injury Frequency Rate (TRIFR) average easing from 6.5 in FY24 to 5.2 in FY25.

Despite these gains, many TRIFRs remain elevated, with 17 companies above seven in FY25. These include Qantas (21.3), JB Hi-Fi’s ((JBH)) The Good Guys (20.0), Coles (14.7), Metcash ((MTS)) (13.8), JB Hi-Fi brand (13.0), Woolworths (12.9), Boss Energy ((BOE)) (12.7), Sigma Healthcare ((SIG)) (12.7), Super Retail ((SUL)) (12.1), Ramelius Resources ((RMS)) (11.1), Endeavour Mining (10.2), IGO Ltd ((IGO)) (10.2), and Wesfarmers ((WES)) (9.5).

Jarden notes while high on an absolute basis, some are below industry averages, eg the air transportation industry was 30 in the FY24 period.

The largest increases in TRIFR were noted at Boss Energy, JB Hi-Fi (group), Auckland International Airport ((AIA)), Worley ((WOR)), Mineral Resources ((MIN)), Ramelius, Coles, and Aurizon Holdings ((AZJ)).

Europe

With the 1 January start date for the EU’s Carbon Border Adjustment Mechanism (CBAM) approaching, investor interest in the outlook for CBAM has intensified, particularly regarding the potential for delays.

Morgan Stanley provides an overview of changes to CBAM so far and a perspective on what lays ahead.

The CBAM is the EU’s tool to put a fair price on carbon emitted during the production of carbon-intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries. It is effectively a carbon tariff.

The CBAM will have implications for in-scope sectors (cement, iron & steel, fertiliser, aluminium, hydrogen and electricity) and EU carbon prices, Morgan Stanley notes. There will be a review of CBAM before it is scheduled to start on 1 January.

Morgan Stanley sees export rebates and anti-circumvention measures as likely to be announced given the Commission has said it intends to address both concerns.

In the analysts’ view, gradual adjustments to CBAM only increase the likelihood of its timely implementation. Morgan Stanley’s base-case forecasts assume a timely start, but the analysts see three potential reasons CBAM could be delayed: lack of industry readiness (most likely), trade tensions, and economic concerns.

Any delay to CBAM must be matched by a delay to the phase-out of free Emissions Trading Scheme (ETS) allowances. Failing to align these timelines would disadvantage EU producers, Morgan Stanley notes.

Bio-Stimulants

Morgan Stanley has hosted Axioma Biologicals, a French biotech firm that designs and manufactures plant-based bio-stimulant solutions for improving agriculture yields under increasing climate stress.

There is a growing opportunity for bio-stimulants (promote plant resilience) over bio-controls (pest protection) due to varying regional restrictions for chemical fertilisers. Plant-based bio-stimulants can be tailor made for specific crop type, region and type of climate peril, though developing the right solution can take 2-5 years.

Morgan Stanley notes these solutions can enhance yield by 5-10% under climate stress. Other benefits include improved chlorophyll activity, shelf life and nutrient uptake.

Premium pricing is balanced by yield productivity gains and resilience. While R&D and distribution raise costs, scalability can drive them down over time.

Near-term growth markets include Australia and South America due to favorable regulation, large farm sizes, and limited agricultural subsidy protection.

FNArena’s dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future: 
https://www.fnarena.com/index.php/financial-news/daily-financial-news/category/esg-focus/

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