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The Materiality of Environmental Risk to Australia's Finance Sector

Prepared by Ernst & Young for
Environment Australia, May 2003
ISBN 0 642 54906 04

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Executive Summary

This scoping paper has been prepared by Ernst & Young for the Commonwealth Department of Environment and Heritage (Environment Australia) in a bid to raise awareness and contribute to the current level of debate on the materiality or significance of environmental risk to Australia's finance sector.

The paper extends upon excisting international literature as well as conclusions from recent local research including Towards Sustainable Finance: A Roadmap to the Finance Services Industry (Monash Sustainability Enterprises 2000) and The Role of Australia's Financial Sector in Sustainability (PWC 2001). This research suggests that issues of materiality or potential significance of environmental risk is not particularly well understood within Australia's finance community when compared with contemporary approaches in the USA, UK and Europe.

Approach to the engagement

Ernst & Young's approach to this engagement has been to consult with a representative cross section of the Australian finance sector.

Our approach aimed to draw out whether environmental risks, on a broad scale, are benchmarked against industry thresholds and whether such risks trigger management responses in the sector.

Our analysis focused on:

Observations, key issues and conclusions

Observations and key issues identified in this paper are:

In researching and discussing these issues with key finance sector participants the following conclusions are drawn: