Climate in Focus: Will the fuel shock be a catalyst for renewed board focus on resilience?

Prime Minister Anthony Albanese and other senior ministers are undertaking regional missions to shore up liquid fuel supplies amid concerns the global fuel shock could deepen or persist – particularly if key supplier countries impose export controls and refining capacity declines further.

Supply chain dependencies extend well beyond fuel, and current pressures on fuel costs and availability serve as a reminder of the vulnerability of Australia’s globalised supply chains, including critical infrastructure. Read our article

Also in this newsletter:

• Director Sentiment Index shows further softening in climate priorities 
• Closing the gap between emissions commitments and action while navigating near-term energy pressures
• Free webinar: Mandatory climate reporting – first-wave lessons for boards
• Market updates: APRA’s latest climate stress test shows how a widening insurance protection gap may impact Australia's financial system resilience; ASIC launches full suite of sustainability reporting e-learning modules; EU–Australia trade deal and climate implications

Will the fuel shock be a catalyst for renewed board focus on resilience?

The current fuel supply crisis is a stark reminder of the fragility of the supply chains that underpin the operations of many Australian businesses. While there are no simple solutions to this, there is growing recognition that building supply chain resilience should be actively discussed around board tables.

Australia, as a medium‑sized economy with a relatively small population spread across a large geographic area, has long been vulnerable to global supply chain disruptions. The country relies heavily on international markets for critical inputs, including fuel, pharmaceuticals, fertiliser, transport components and digital infrastructure. As demonstrated by the Middle East conflict and previously during the pandemic, these supply chains can be highly susceptible to global shocks. Read more.

Director Sentiment Index shows further softening in climate priorities 

The latest AICD Director Sentiment Index, to be released tomorrow, shows a continued softening in climate priorities as economic pressures rise. Climate change has fallen as a short-term issue directors want government to address (with only 13% survey respondents selecting it) and now ranks third over the longer term, behind productivity and ageing population.

This shift is broad-based, with significantly more directors dissatisfied than satisfied with climate and energy policy (64% vs 17%). While the survey predates the current energy shock, it suggests that while climate considerations are becoming more embedded in governance and reporting practices for some organisations, they are increasingly competing with more immediate economic priorities.

Market developments

• APRA insurance stress test: The regulator’s latest stress testing shows that by 2050 climate risks could significantly widen the home insurance protection gap. Rising premiums and reduced coverage – particularly in regional areas – may pose broader risks to financial system resilience.
• ASIC sustainability reporting modules: ASIC and AASB have launched a suite of e-learning modules to support sustainability reporting capability. The initiative aims to build understanding of new disclosure requirements as mandatory climate reporting phases in.
• Gas supply outlook: Australia’s east coast gas supply outlook has improved in the near term, with shortfall risks pushed back to 2029. However, AEMO warns longer-term supply pressures remain without new investment and continued electrification.
• Future Made in Australia policy: Analysis in the AFR suggests the government’s $23 billion Future Made in Australia agenda may fall short on supply chain resilience. Questions remain around whether current settings adequately address structural dependencies in critical industries.
• Rio Tinto Boyne smelter funding deal: A $2 billion government-backed deal will secure the future of Rio Tinto’s Boyne aluminium smelter to 2040. The agreement supports industrial transition while underpinning new renewable energy and storage investment in Queensland.
• Integrity gap in climate and energy debate: An Australian parliamentary report finds misinformation and declining trust are undermining effective climate and energy decision-making. It calls for coordinated action across institutions to strengthen information integrity.
• ACCR appeal in Santos case: The Australasian Centre for Corporate Responsibility has appealed the Federal Court decision in its greenwashing case against Santos. The appeal keeps a focus on legal expectations for climate-related disclosures and net zero claims.
• CEFC backs EV uptake for households and SMEs: The CEFC is investing to accelerate electric vehicle (EV) uptake among households and small businesses, expanding access to finance, and lowering upfront cost barriers. Meanwhile, rising fuel prices are driving increased uptake of EVs through novated leasing, particularly among salaried employees.
• ACS data platform and climate datasets update: Updates to the Australian Climate Service’s Data Explorer and new climate datasets improve access to consistent, decision-useful climate risk information. Enhanced tools allow comparison of hazards across warming scenarios, supporting adaptation planning.
• Tropical Cyclone Narelle: The severe cyclone’s unusual path across three Australian coastlines highlights increasing volatility in extreme weather patterns. The event underscores growing physical climate risks and implications for infrastructure and resilience planning.

International developments

• EU–Australia trade deal and climate implications: The recently inked partnership links security, trade, and environmental responsibility, signalling stronger alignment on sustainability expectations. The framework reflects a model where cooperation is tied to standards on climate, environmental protection, and labour, with safeguards to protect domestic industries. It points to a potential shift toward embedding sustainability requirements into trade and international engagement.
• State of the Global Climate 2025: The World Meteorological Organization (WMO) reports the past decade as the hottest on record, with accelerating ocean heat and sea-level rise. The findings reinforce the narrowing global carbon budget and escalating physical climate risks.
• Germany climate action plan: In a plan that signals continued policy momentum in major economies, Germany has adopted a new climate plan aimed at reducing emissions and fossil fuel use, reinforcing its transition pathway.
• Japan carbon market developments: This month, Japan’s 300–400 biggest emitting companies (with scope 1 emissions of at least 100,000 tonnes of CO₂-e) began mandatory climate disclosures under the next phase of its emissions trading system. By September 2027, these companies – representing around 60% of national emissions – must disclose their emissions and set reduction targets. Japan joins jurisdictions including the European Union and China in implementing a cap-and-trade system to drive emissions reductions in heavy-polluting sectors.
• India’s updated climate targets (NDC): India has strengthened its 2035 climate targets, committing to a 47% reduction in emissions intensity of GDP (from 2005 levels) and 60% of installed electricity capacity from non-fossil sources. It also aims to expand forest and tree cover to absorb up to 4 billion tonnes of CO₂. The targets signal a step-up in near-term action while maintaining its longer-term net zero goal by 2070.
• Climate campaign expands against BP: A group of European investors led by Follow This is urging BP to abandon plans to scrap company-specific climate reporting commitments, including requirements tied to climate strategy, emissions reporting, and executive pay.
• TotalEnergies questions 1.5°C alignment: The French energy company has indicated it cannot set net zero targets aligned with 1.5°C, citing feasibility concerns.