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R EV I E W

Annual Review

Pathways For Change In 2012-13

The Climate Institute

www.climateinstitute.org.au

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Pathways for change during a year of extremes

01 ForewordJohn Connor, CEO A year of extremes.

03 SnapshotA quick look at our key achievements in 2012-13.

07 Purpose + RoleMark Wootton, Chairman Translating the issues: research and communication.

17 Coming Ready or NotManaging the unavoidable: building Australia’s resilience.

43 DevelopmentSam Meers, Chair of Development Sub-Committee. Developing a sustainable financial future for the Institute.

45 DevelopmentA View from Within Andrew Demetriou, Board Member Why The Climate Institute is uniquely suited for the challenges ahead.

21 Playing FairWhat is Australia’s role in a world looking to address climate change?

53 Financial StatementsA Financial Overview 2012-13.

66 Looking AheadThe challenges and opportunities we face.

13 Dangerous DegreesIdentifying and addressing the growing risks of climate change.

09 Strategic Focus John Connor, CEO Pathways for change - looking ahead to decisive, meaningful climate action.

29 Competing in a Carbon Constrained WorldCountries are starting to lead the shift to a low-carbon world. Is Australia at risk of losing out?

47 Staff + BoardMembers of The Climate Institute Team and Board.

35 Seeking Sustainable Solutions to Climate ChangeFinding the solutions wherever they may lie.

51 Partners + SupportersAcknowledgement of the ongoing support of a broad range of individuals and organisations supporting and working with us.

Contents

PATHWAYS FOR CHANGE IN A YEAR OF EXTREMES

7 January 2013

Tasmania ravaged by bushfires

“ Some mixed and strange emotions as I drove the Arthur highway a day after it was reopened to the public, meeting people amongst the ruins of their homes.” Michael Hall, Creative Fellow

21 September 2012

Arctic sea ice hits record low

US National Snow and Ice Data Center announced that Arctic sea-ice had fallen to 3.41 million square kilometres—the lowest summer minimum extent since satellite observations began in 1979. The new record minimum is nearly 800,000 square kilometres less—an area close to the size of New South Wales.

16 August 2012

The Federal Opposition declares its support for a second commitment period under Kyoto Protocol

In spite of the partisan nature of much of the domestic policy debate, bipartisan support for the second commitment period is achieved.

28 August 2012

The Government announces it will link Australia’s carbon laws to those of the EU

“ While our preference is for a longer term price floor than in current legislation, linking with the world’s biggest carbon market is welcomed so long as it is combined with strong policies for clean energy and energy efficiency.” Erwin Jackson, Deputy CEO of The Climate Institute

2012-13

Context

2 December 2012

Australia signs up to the second commitment period under Kyoto Protocol

“ The Government’s decision will help bolster international efforts to secure a new legally binding agreement to cover all major emitters by 2015.”

“ A second round of targets under Kyoto is a critical lever to achieving a new legally binding agreement that covers all major emitters.” Erwin Jackson, Deputy CEO of The Climate Institute

29 October 2012

Hurricane Sandy

“ As the costs of Sandy climb by billions of dollars there are urgent lessons for governments and significant implications for business. On Monday we released a report prepared in conjunction with the business sector, entitled Coming Ready or Not: Managing climate risks to Australia’s infrastructure. This revealed Australia’s electricity, transport, property and financial infrastructure is mostly underprepared.” John Connor, CEO of The Climate Institute

1July 2013

Carbon laws one year on

One year on: electricity sector emissions have dropped, the economy is growing and the cost of living has not skyrocketed. The Climate Institute produced a media brief and infographics summarising the impacts.

26 June 2013

Obama lays out his climate action plan

“ Importantly, in the face of recent severe climate impacts, President Obama has outlined important mandates to drive investments in improving the resilience of the US economy, infrastructure and communities to the impacts of climate change. ‘Superstorm’ Sandy, severe drought and bush fires were stark reminders of the vulnerability to climate impacts faced by even one of the world’s richest nations.” John Connor, CEO of The Climate Institute

18 June 2013

China’s first pilot emissions trading scheme commences

The first of seven planned Chinese pilot emission trading schemes kicks off. Combined, the pilot schemes will be the world’s second largest carbon trading scheme.

11 May 2013

Global carbon dioxide levels pass 400ppm

“ Humanity has never been here before. The atmosphere hasn’t seen CO2 this high for hundreds of thousands, if not millions, of years. We are in dangerous and uncharted territory, with little time to ensure a safe and sustainable future.” John Connor, CEO of The Climate Institute

8 January 2013

The hottest month on record

Bureau of Meteorology forced to add two new colours to map as temperature records are shattered.

“ This unprecedented weather certainly raises the questions of what the future holds. Heatwaves are part of the Australian experience, but this one is not normal. It is very unusual for extremely hot conditions to persist for so long and cover such a large part of the continent.” Corey Watts, Regional Projects Manager of The Climate Institute

10 January 2013

California emissions trading scheme kicks off

Another major economy implements an emissions trading scheme. once again debunking the myth that Australia is leading the world on climate action.

1 February 2013

OECD report busts carbon price myths

Despite political claims to the contrary, research from the OECD finds that 29 countries have higher ‘effective’ carbon prices than Australia.

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2012-13

Foreword

The last financial year was a year of extremes. Extremes only partly unexpected, and extremes predictably unrealised. The context in which we have found ourselves has challenged and sharpened us as an organisation, as we continued to work towards ambitious yet achievable solutions to the ever-present and very real climate change threat.

In May, the world’s oldest observatory tracking levels of carbon dioxide (CO2) in the atmosphere recorded 400 parts per million for the first time in at least 800,000 years. In Australia, numerous heat records were broken over the “angry summer”. Overseas, Superstorm Sandy joined a host of other extreme events around the world.

By June, carbon price scares of city, industry and economic wipe-outs were extreme and unrealised. Analysis confirmed modelled expectations that the impact on inflation would be less than one per cent. This meant household support was more than adequate for low and middle income households. With the carbon laws in place, what we saw was that the economy continued to grow, while emissions from the energy sector fell and clean energy grew.

The political realities remained turbulent if not extreme. Kevin Rudd returned as Prime Minister with a promise to bring forward emissions trading by one year, to July 2014. Unfortunately this was almost completely sold as a cost of living benefit, rather than bringing forward a limit on carbon pollution that is the reality of emissions trading. This cost of living focus only validated and revitalised the unsubstantiated scare campaigns.

The reality amongst Australians was that in June 2013, as our Climate of the Nation research demonstrated, concerns about climate change were emerging from the shadows of the “carbon tax” and indeed the “carbon tax lie”. This is not to say the carbon laws were becoming popular, but that opposition and support for their repeal dropped significantly to less than a majority status for the first time since the debate intensified in 2010. And for the first time since 2007, there were more Australians wanting their nation to show leadership in international solutions.

Over the year, Australia continued its broadly positive and constructive approach to the steadily progressing global negotiations. This was enhanced by having passed into law a legislative framework that could credibly deliver on target commitments made to the international community of reducing emissions off 2000 levels by up to 25 per cent by 2020.

Another significant, if not extreme, development over the year was in low-carbon investment and technology costs. The costs for wind, and in particular solar, plummeted. Real impacts were felt on existing business models that assumed that business as usual could continue for years to come. However, investment in clean energy began to stall domestically, as uncertainty about the future of the carbon laws and the renewable energy target grew.

Globally, clean energy investment remained solid, but with the centre of gravity shifting to Asia. This was highlighted by The Climate Institute/GE 2013 Low Carbon Competitiveness Index that found that the big movers were in Asia, led by China’s move from a ranking of 7th to 3rd in terms of its ability to compete in the global low-carbon economy. Australia improved its score for the first time but still lagged, ranking 17th amongst the G20 countries.

The impact of extreme weather events, such as Superstorm Sandy, marked a shift in community and business attitudes. These areas of society are slowly awakening to the reality that climate change is no longer a future, but very much present issue. It is also costly and dangerous. Those costs also highlight how for Australia, as the advanced economy most exposed to extreme weather and climate impacts, action is in our national climate interest.

Whatever the outcome of our short-term electoral cycles, these global mega-trends of clean energy investments, technology cost reductions and climate impacts will continue to show prominently on the radar, even though they may not yet fully sound the warning bell amongst political, business, investor and community leaders.

As this Annual Review demonstrates, The Climate Institute rang the bells of the threats as well as the opportunities of climate change. We continued our focus on ambitious but achievable solutions across the spectrum of public policy to private investment.With your help we can continue to do so in pursuit of our vision of a resilient Australia prospering in a zero-carbon global economy while participating fully and fairly in international climate solutions. While we were fortunate to receive solid support in this last year, much of this has been pledged to core activities in the coming year. We need your support more than ever if we are to maintain our efforts to move Australia forward in the challenging times ahead.

I would like to thank the supporters of The Climate Institute, its Board, Strategic Council and staff for enabling this year’s achievements. We will continue to defend these achievements and seek to build on them in the months and years ahead.

John Connor CEO

Dangerous Degrees Context Explainer

Election 2013Project

Coal Seam Gas: Facts, questions and challenges

Discussion Paper + Submission

Unburnable Carbon: Australia’s carbon bubble

Report

As it has done in previous elections, The Climate Institute conducted a comprehensive analysis of the partys’ climate policies, assessing their ability to deliver the necessary cuts in emissions, accelerate investment in low-carbon technology and help prepare Australia for inevitable climate impacts. The Institute outlined its key policy tests in a policy brief entitled Managing the Unavoidable while Avoiding the Unmanageable.

The Climate Institute conducted an important piece of work examining the role of coal seam gas as a bridging fuel to a clean energy future. The discussion paper and subsequent submission uncovered some important gaps in accounting and performance measures.

As investors begin to realise the magnitude of the climate challenge and recognise it as a risk to be managed, the concept of the ‘carbon bubble’ is emerging. Only 20-40 per cent of existing coal, gas and oil reserves can be burnt if we are to have a reasonable chance of staying to 2°C. In partnership with the UK’s Carbon Tracker Initiative, The Climate Institute examined the implications of the bubble on Australia’s coal reserves.

Defining Australia’s fair share of the global carbon budget

Policy Brief

Global Climate Leadership Review Spotlight Report + Data Visualisation

Asset Owners Disclosure Project + The Vital Few

Project + Social Media Platform

Doha Climate SummitProject

What is Australia’s fair share of the global carbon budget? Recognising that Australia needs to use a long-term carbon budget approach to properly assess the risks, responsibilities and realities of doing its fair share, The Climate Institute assessed multiple approaches for defining Australia’s carbon budget in its policy brief, Operating in Limits: Defining an Australian Carbon Budget.

As it did in 2012, The Climate Institute conducted a review of Australian climate policy in a global context. In addition to exploring global trends and policy advances, Vivid Economics was commissioned to update the Low-Carbon Competitiveness Index with the support of General Electric (GE). Creative Fellow Michael Hall contributed striking imagery of China’s emerging influence as a clean energy superpower to support this body of work.

Since its inception in 2008, The Climate Institute has been involved in the critical investment work undertaken by the Asset Owners Disclosure Project (AODP). This year, the AODP released the first ever global climate investment index to show how the world’s biggest investors, including superannuation funds, are managing climate risk. The Climate Institute was also involved in developing the AODP’s groundbreaking new social media platform – The Vital Few – to harness the power of a few ‘citizen investors’ to hold superannuation and pension funds to account for their investments.

Following the international climate change negotiations has been part of The Climate Institute’s core work since it started in 2007. For the Doha Climate Summit, The Climate Institute released a policy brief outlining expectations (and subsequent outcomes) of the latest round of UNFCCC negotiations. Deputy CEO Erwin Jackson was on the ground as a key media commentator, providing insights through daily media briefings, videos and tweets as developments occurred.

A rise of only a few degrees in the average global temperature risks our prosperity, security, and health. The second in the series of explainers, Dangerous Degrees was launched by John Connor, Dr John Hewson and Professor Tony McMichael at a scientific symposium at Australian National University where they donned hard hats and fluoro vests to draw attention to the deadly serious implications of our warming world.

Snapshot 2012-13

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Coming Ready or Not Spotlight Report + Workshop

Carbon Markets and Climate Policy in China

Project

Our Uncashed Dividend: The health benefits of climate action

Briefing Paper

The report Carbon Markets and Climate Policy in China: China’s pursuit of a clean energy future - commissioned by The Climate Institute and prepared by international carbon project developer Climate Bridge - outlined China’s ambitious climate and clean energy policies, debunking the myth of inaction.

All major emitting countries are implementing policies to reduce emissions, drive clean energy investment and improve energy efficiency. The Climate Institute developed an interactive map to serve as a comprehensive summary of high-level national policies on climate change.

Actions that cut carbon pollution can improve Australians’ health and save billions of dollars. In partnership with the Climate and Health Alliance, The Climate Institute launched a report looking into the health benefits of acting on climate change. The launch was supported by key industry bodies including the Australian Medical Association (AMA) and Australian Healthcare and Hospitals Association (AHHA).

Can Australia’s infrastructure handle climate change? Coming Ready or Not examined the physical impacts and cascading consequences of climate change on the infrastructure sector. This body of work also included a workshop and follow up discussion paper that, in partnership with Manidis Roberts and KPMG, modelled the business-level impacts of interdependent infrastructure.

Global Climate Action MapInteractive Map

Climate of the Nation 2012Spotlight Report + Vox Pops

Climate Partners Partnership

Review of the Renewable Energy Target

Analysis + Submission

Creative FellowshipFellowship Program

Climate of the Nation remains the most comprehensive public opinion survey on climate change in Australia. The reports offer invaluable insights into the state of public opinion capturing everything from concern over impacts to the understanding of solutions. To put a face to the quantitative and qualitative research, The Climate Institute took to the streets to interview people for this engaging vox pop series.

The Climate Institute’s strategic partnership program with leading businesses continued into its third year. In addition to regular roundtable discussions on the increasing role of business in addressing climate change, the Institute also worked with a number of the partners on projects including the Global Climate Leadership Review 2013, Coming Ready or Not: Managing climate risks to Australia’s infrastructure, Boosting Australia’s Energy Productivity and ongoing work looking at the importance of energy efficiency. Current partners include Westpac, Pacific Hydro, KPMG, Ogilvy Earth, Mirvac, GE, AGL and Australia Post.

Given the importance of the Renewable Energy Target (RET) in driving down Australia’s carbon emissions, the Institute was focused on protecting and strengthening this program in 2012-13. This included an analysis of the existing RET and a submission to the Climate Change Authority (CCA) as part of their review.

Renowned photographer Michael Hall joined The Climate Institute as its inaugural Creative Fellow. The fellowship has allowed Michael to continue his important work documenting the impacts and opportunities of the climate change challenge. Michael has produced arresting imagery through his trips to China and around Australia that has been instrumental in increasing our work’s impact. A photo essay on the Tasmanian bushfires of early 2013 featured on Sydney Morning Herald’s website, while ABC Science compiled a selection of the project’s imagery for their World Environment Day coverage.

Snapshot 2012-13

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As I look back on 2012-13, it was a year that seemingly saw polar extremes across all aspects of climate change.

On the one hand we had CO2 levels reaching new heights, toxic politics, scare campaigns, floods and bushfires. On the other, China’s accelerating action, a drop in Australian emissions, continued reductions in the cost of renewable energy technology and rebounding support for climate action.

It all reinforced once again, the need for The Climate Institute’s innovative, fact-driven, long-term, pragmatic and solutions-focused approach to the climate challenge.

We were established in 2005 with the purpose of “raising public awareness of climate change and related issues and promoting the development and implementation of policies on climate change and related issues”. The Institute has achieved much to meet this overarching purpose, but, as we sit at the end of our seventh financial year, it is clear that much more needs to be done.

Given the uncertainty that now faces Australia—particularly when it comes to having comprehensive climate policy that can achieve meaningful and long-term emissions reductions—the last few months gave the Institute the invaluable opportunity to take stock and ready ourselves for the challenges ahead.

It is likely that we are about to enter a period where Australia risks lagging behind the world with regards to climate action. This happens as China is making genuine progress, moving ahead with assertive policies including significant emissions trading schemes in a number of regions. The cost of renewable technologies continues to fall and other countries are starting to take economic advantage of this. Finally, a genuine global agreement has become a real possibility in 2015.

Against this background, Australia continues to be mired in a circular debate with itself about the need for action. We need to break this cycle if we are to avoid a return to the trials of 2005, when it seemed like Australia was destined to forever be a blocker to effective climate action.

Perversely, this likely reality is exactly what The Climate Institute was created to combat.

We are an independent organisation, a thought-leader that drives informed and innovative climate action. Primarily funded by private philanthropy, we are not beholden to any political party or business group. We have the independence to analyse the realities of climate change and find the best solutions to benefit all of humanity, rather than a select few.

Having said that, the last few years have been difficult and have asked a lot of the small, passionate team that makes up the Institute. We need to recognise the need to re-invigorate ourselves and build our own resilience once more for the coming battles.

I am reminded of something John Connor said earlier this year—that finding the solutions to climate change is a multi-generational and multi-decadal challenge. There will be periods of great progress and, conversely, years when it seems like we are moving backwards. These periods of regression are the times when The Climate Institute needs to truly fulfil its purpose. These are times to find and open up the hard paths to progress; to work with those in the business world, community and government who are still striving for solutions.

The Institute is only one organisation. But given the realities we now face, I believe that it is a particularly important one. I urge you to do all you can to find ways to support The Climate Institute—whether through sharing our work, partnering with us or contributing financially. I would also encourage you to read Sam Meers’ section on Development (page 43) to understand the vital importance of growing our supporter base at this time.

In spite of the very real challenges that face us, I remain ever-optimistic that with the help of our growing network of supporters, we will find a way to rise to meet each challenge and open up the pathways to zero-carbon prosperity for the coming generations of Australians.

Mark Wootton Chairman

We are an independent organisation, a thought-leader that drives informed and innovative climate action. Primarily funded by private philanthropy, we are not beholden to any political party or business group. We have the independence to analyse the realities of climate change and find the best solutions to benefit all of humanity, rather than a select few.

Purpose + Role

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Strategic Focus

This was a year in which the realities met the rhetoric. A year in which pin-balling scare campaigns that began back in 2008 finally came face-to-face with the realities of the carbon laws, their household support and their business support.

Also emerging is the hard physical reality that if you want to avoid 2°C warming, there is only so much more heat-trapping CO2 and other greenhouse gasses that can go into the atmosphere. Just do the maths.

With regards to the scare campaigns, after the first year of the carbon laws, Treasury predictions of a 0.7 per cent inflationary impact proved accurate according to Westpac Economics. Overall inflation in fact was very low—despite the flow through of network costs (poles and wires) to electricity. This meant that low and middle income households were well supported through the household compensation package.

It was also a year in which virtually all the claims of negative impacts on economic growth were disproven as Australia’s economy continued to grow. This continued economic growth coincided with emissions reduction of just under 7 per cent and a 23 per cent increase in electricity from renewable sources in the National Energy Market over that period of time. In this, the carbon price supported the renewable energy target and other structural changes. Revenue raised by the carbon price went to work in support of carbon farming, energy efficiency investments and carbon productivity improvements.

The reality of “unburnable carbon” began to crystalise for investors, rating agencies and analysts. This concept that we have a limited budget of greenhouse gas emissions for various warming outcomes (tending to vary from 1.5°C up to 8°C of warming) has been around since the 1990s, but it only seemed to take deep root this year. Activists like 350.org, banks like HSBC, ratings agencies like Standard and Poors and international bodies like the International Energy Agency began to do the math and came up with consistent answers. At various risk levels of achieving warming targets below 2°C, only between a fifth and a third of commercially available carbon resources can be used.

As for the last financial year, our work continued to focus on the three key areas we see as necessary for a successful transition to a zero-carbon Australia.

2012-13 was a turbulent year for climate change action. A year that promised so much in terms of Australia finally stepping up to the challenges we face, but ended with the likelihood that progress is about to become much harder.

Economic Transformation A robust economy geared to withstand the climate change challenge

and prosper, by transforming the threat into an opportunity.

International Accountability A global challenge requiring a global effort, with all countries contributing to a full and fair solution and Australia playing its part as a leader alongside other nations.

Societal Leadership A multi-generational, multi-decadal challenge requires

a multi-generational, multi-decadal response.

Strategic Focus

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Economic Transformation International Accountability

There was steady progress in international negotiations building on the historic Durban platform of 2011 in which countries agreed that there would be a single global treaty with legal binding outcomes for all major emitters. 2015 is the deadline for this agreement, making the next few years crucial.

In Doha in December 2012, we welcomed Australia’s pledge to a second commitment period under the Kyoto Protocol and the fact that this was in part enabled by Coalition support. This re-affirmed both major parties international commitment to the conditions and 2020 emissions reduction target range of between 5 and 25 per cent below 2000 levels.

This sets up important international responsibilities for Australia in 2014 to state its actual pre-2020 target. Australia will also need to indicate how it will assist in the financial investment in cleaner development of poorer neighbouring developing countries and help them to prepare for unavoidable climate impacts.

How Australia performs on these responsibilities and in contributions to climate diplomacy will be influential, if not crucial, to working towards our national climate interest in avoiding 2°C warming.

How our investors and policy makers perform will also determine Australia’s carbon competitiveness in the Asian region, fast becoming the centre of gravity for clean energy investment and carbon markets.

This is a difficult investment landscape but one in which despite, or indeed because of, this frustration, the longer term responsibilities of those managing superannuation, insurance and sovereign wealth funds should require greater action, investment and preparation.

The Climate Institute continued its pioneering analysis of this sector through its support for the Asset Owners Disclosure Project (AODP) and its fund member engagement platform The Vital Few.

The first ever global independent survey of 1,000 of the world’s biggest funds revealed unsatisfactory and risky performance from most. Only two super funds were rated as AAA and only one of those was Australian: Local Government Super. Some in this industry have been helpful voices in the call for public policy reform. But it is an industry still long on the talk and short on the walk when it comes to its own practices.

The Climate Institute also examined the readiness of Australian infrastructure for the climate impacts already beginning to hit home. Superstorm Sandy provided a vivid and sobering backdrop for the launch of our Coming Ready or Not analysis of key economic infrastructure sectors such as energy, transport and property. That analysis revealed that most of these sectors had at best patchwork preparation for extreme weather and other climate impacts. Most were poorly prepared, poorly coordinated and generally walking backwards into the 21st century relying on historical climate data rather than realistic scenarios of future warming.

Our challenge heading into 2013/14 very much remains to lift the game of business and government to help manage the unavoidable impacts whilst helping to avoid the unmanageable impacts of greater warming.

The Climate Institute joined up with Carbon Tracker to publish Australia’s first ever analysis of the unburnable carbon in our fossil fuel reserves. This research revealed that Australia’s commercially available coal resources alone could equate to a third of a precautionary global carbon budget or almost 75 per cent of a global budget for coal. This is tough math for Australia which currently has 11 per cent of a competitive global coal market.

This highlights that the planned massive expansion of coal mining rests on a speculative carbon bubble.

The reality is that the carbon bubble is getting more precarious with significant if yet insufficient developments of the global low-carbon economy.

This year, The Climate Institute and GE repeated our Low Carbon Competitiveness Index of the G20 countries. Australia made a fragile recovery with increased investment in clean energy and increased investments in human capital, e.g. education. However, while our score increased, increasing international carbon competitiveness saw Australia still languish seventeenth amongst the G20 nations.

The measurement and performance of carbon competitiveness as well as carbon and energy productivity will increasingly be the relevant indicators of economic health in the 21st century.

Yet this was a year in which Australian investment in clean energy began to stall as investors and companies confronted increased uncertainty and confusion about carbon policy and clean energy policy. Considering a stable and credible policy framework had just come into sight, the frustration was palpable.

Societal Leadership Organisational Development

As I noted in last year’s Annual Review, we continue to seek broader support to enable us to maintain our effectiveness. The establishment support from the Poola Charitable Foundation (Tom Kantor Fund) ended in 2012 and we have been making strenuous efforts to attract additional funding from other sources.

We established a number of new funding structures in the 2012-13 financial year, including a new philanthropic supporter program, 50 for 5 for 2050. Whilst this has had a steady start in attracting new support, fundraising continues to be challenging. I encourage all of you reading this report to support us in any way you can—whether financially, through pro-bono support or even just by telling others about us.

The year ahead is set to be particularly tough, another year of extremes, so we will need all the support available!

One of the more important developments of the last year has been the emergence of a low-carbon political economy in Australia. For those that care to look, there are now a range of business entities and interests backing climate action and climate preparedness. Banks, industrial conglomerates, energy firms, accounting firms, property developers and more have backed carbon pricing and other solutions to the climate challenge.

A number of these are represented amongst our Climate Partners, who once again provided an important network of support, insight and constructive feedback.

Mindful that the necessary fast transition to a low-carbon economy won’t be sustainable unless it is a fair one, The Climate Institute also continued to deepen its relationships with civil society groups, such as the Southern Cross Climate Coalition—an alliance with the Australian Council of Trade Unions, Australian Council of Social Services and Australian Conservation Foundation.

We also continued to examine Australian attitudes to climate change through our Climate of the Nation research. Our fifth review of the prevailing attitudes and drivers behind them was released just ahead of the Federal election.

Other significant work centred on our ongoing efforts to translate the science of climate change and to communicate both ours and others’ research into the science, economics and solutions effectively and accessibly. We developed graphic and human dimensions to engage diverse audiences and ensure the topic does not become stale or be easily ignored. Our growing foray into social media and the effectiveness of the imagery by our creative fellow, photographer Michael Hall, have been growing in importance to our work.

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DANGEROUSDEGREESClimate scientists tell us we are heading for more than 2 degrees of warming, but what does this mean?

At the core of The Climate Institute’s work is raising public awareness of climate change and promoting policies and solutions that help avoid the unmanageable and manage the unavoidable risks of the dangerous degrees of warming we are facing.

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Scott Griffith in the wreckage of his house after the Tasmanian bushfires.

A lonely reminder of the impact on future generations.

Climate Change Context

Dangerous Degrees A look at why warming of only a few degrees brings high risks. Given it’s already volatile climate, Australia is particularly vulnerable to these risks.

Supported by the Dara Fund No 2

One of the key elements of the Dangerous Degrees work, was our analysis of the impacts of four emissions reductions scenarios. ‘Business as usual’ was one of these and leads to a 5.5 - 7.1ºC rise in global temperature by 2100.

We should not be lulled into a false sense of security, thinking that the globe will warm slowly, steadily, or gently. Instead, it looks like Earth is in for a bumpy ride, punctuated by moments of apparent calm, only to surge into more volatile periods.

The bright news is that there is still time to change and find solutions. The last decade has seen a global boom in clean energy and more than 80 countries representing around 80 per cent of emissions have committed to reduce their carbon pollution. All major economies are putting policies in play to cut emissions, drive clean investment, and improve energy efficiency. Climate change now features in high-level strategic dialogue between the great powers.

The longer we wait, the harder the task. Advanced modelling suggests that emissions must peak by 2020 if the world is to have a reasonable or achievable chance of keeping under two degrees. Two degrees is not a benchmark of safety to aim for, however, but a global guardrail to steer clear of. There is a big and growing gap between the emissions pathway we need to be on, and where we are headed now. Closing the gap is still do-able. The technology and know-how already exist to re-tool the economy for clean growth and shared prosperity.

What is still sorely lacking is the political will and the realisation that the past is no longer a good guide to the future.

Getting on the right track to avoid dangerous climate change means starting now. It means reducing all pollutants, making sure all emitters do their fair share, investing in a broad mix of clean technologies, and deploying a diverse policy portfolio to hedge against risk. Even then, we’ll still need to draw down carbon out of the air and store it for a long time.

If we start in earnest now, we not only avoid mounting costs and risks, we also give ourselves the chance to transition to a clean economy in a steady and manageable fashion, such that we keep our options open. Good steps are being made in the right direction because they make good economic and business sense. Similarly, some businesses are beginning to recognise the risk of ignoring the warming that is now, sadly, unavoidable. Even 2ºC of warming is a world of danger.

This year we followed up our Carbon 101 guide to carbon and carbon pollution, with a new guide, Dangerous Degrees.

Dangerous Degrees explains why global warming of only a few degrees comes with high risks. It explains why we must act now to reverse the rise in carbon pollution and shows how it is still in our powers to do so.

The President of the World Bank has stated that letting the globe warm by 4ºC or more would come with “high uncertainty and new risks that… can and must be avoided”. A recent World Bank report Turn Down the Heat, showed that, unchecked, climate change will deprive millions of prosperity and undo decades of progress.

Defence experts point to climate change as a risk multiplier, while medical scientists and psychologists fear a sharp rise in the health toll. Climate change is no longer an environmental issue; it is core to the success or failure of our future health, security, and prosperity.

Carbon pollution in the atmosphere has risen by 40 per cent since the start of the Industrial Revolution, and is now at levels greater than at any time for least 800,000, possibly millions of years. In April 2013, for the first time, the level of CO2 in the air reached 400 parts per million at the world’s longest serving atmospheric observatory atop Mauna Loa Volcano in Hawaii.

The average global temperature is now nearly 1ºC above that at the start of the 20th century.

On present trends, humanity will pump up the world’s temperature up by at least 4ºC by 2100, if not well before. Global warming like this hasn’t been seen since the end of the last Ice Age, when enormous ice sheets, thousands of metres thick, covered where London and New York now stand. Back then the warming took centuries and fundamentally changed the face of the planet. Now, the climate is changing in mere decades.

Australia is more exposed to climate risks than any other developed nation and it is in our national interest to do what we can to help avoid even 2ºC warming above pre-industrial levels.

The south of the continent is becoming drier, the tropical north wetter. Droughts, floods, fires, and heat waves are becoming more frequent and more intense. Many parts of the country saw their warmest winters this year, while the country experienced both its hottest summer and hottest January on record. Australia and worldwide, the last decade was the warmest on record, and every one since 1970 warmer than the last.

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Dangerous Degrees

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COMINGREADY OR NOT

It has become clearer that there are a number of impacts from climate change already on their way in spite of a number of countries’ building efforts to mitigate emissions.

As it has become increasingly clear that we need to manage the unavoidable impacts of climate change, The Climate Institute has started to focus more on resilience.

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Coming Ready or Not Our first look at Australia’s preparedness for climate change showed that key infrastructure was largely unprepared.

Supported by Mirvac, Westpac, KPMG, Manidis Roberts and Bond University

An overpass in New South Wales. Transport infrastructure is largely unprepared for climate change.

Another coal train heads to Newcastle as a carbon bubble builds.

Flooding in Queensland. $6 billion worth of infrastructure was damaged in the summer of 2010-11.

Climate Change Context

Coming Ready or Not built on our 2011-12 report looking at the mental health impacts of extreme weather and the urgent need to build resilience in Australian communities.

Climate impacts to infrastructure cascade through the economy and are felt throughout the community. Modelling for the 2008 Garnaut Review conservatively estimated that the annual costs of unmitigated climate change on Australia’s infrastructure would reach about $9 billion in 2020, rising exponentially thereafter.

The Institute’s Coming Ready or Not was a call-to-action, as the likely costs of ignorance and inaction are high and are in fact already being felt.

Research for superannuation funds found that climate change is already costing an estimated $US1.6 trillion globally per year, rising to over $US4 trillion by 2030. Infrastructure damage is the largest single cost incurred. Australia represents 2 per cent of the global re-insurance markets, but in the last five years it has incurred 6 per cent of the losses.

Australia, with its wealth and years of experience with extreme weather events, should be better placed to manage at least the emerging climate risks. Coming Ready or Not, like the aftermath of the Victorian bushfires and Queensland flooding, reveals the high stakles risks for business, finance and health when there is a disturbing lack of preparedness in Australia’s vital infrastructure.

Following from Coming Ready or Not, a pilot process for climate-related risk analysis was prepared by Manidis Roberts (a part of the RPS Group) and KPMG for metropolitan businesses. The work—Infrastructure Interdependencies and Business-Level Impacts—included expert analysis and consultation, as well as interdependency mapping and quantitative modelling.

The Climate Institute’s work on interdependent risks to infrastructure in warming world, together with our prior work on mental health and climate, formed the basis of a submission to a parliamentary inquiry into Australia’s preparedness for extreme weather.

This work has proven particularly impactful in extending our resilience research and solutions well beyond its initial scope and it has been taken up by businesses, local governments and communities in regional areas. We aim to continue to explore what resilience and adaptation means to Australia and to deepen our research and recommendations in this area.

The continuing need for us to explore resilience based research alongside our mitigation work highlights the growing urgency to act as the list of unavoidable risks contiues to grow.

2012-13 saw us undertake a number of significant projects highlighting the need to build Australia’s resilience to climate change impacts while at the same time accelerating mitigation efforts.

Even with our best efforts to rein in emissions, the average global temperature will continue to climb. If Australian and international mitigation efforts combined can peak emissions before 2020, and we can capture and store excess carbon pollution, then we will still see a rise of at least 1.5ºC above the pre-industrial average. Given that a rise of less than 1ºC is already stirring up extreme weather, a mere 1-2ºC is still a significant danger.

Our Coming Ready or Not report synthesised research on the impacts and flow-on consequences of climate change on major infrastructure assets such as electricity networks, rail and road, built property, and water supply. It analysed the state of risk management amongst owners and operators of major infrastructure assets, and assessed the role and response of government.

The results were sobering: key infrastructure is largely unprepared and operating as if it was the 20th century, not the 21st. Electricity, financial services and the road and rail sectors are underprepared. Property is at an early stage of preparation, whilst the water supply sector is relatively advanced.

Public policy on adaptation is patchy and highly fragmented. Australia still lacks a nationally coordinated approach to managing climate risks. Under pressure from developers, state governments are relaxing planning controls. Mapping and modelling of projected future climatic conditions, along with information on preparedness for likely climate impacts, are fragmented, dispersed, and in many cases inaccessible.

The business response is also uneven. Some are moving to better understand and manage their exposure to climate risks, but most base their plans on historical, not future climate. Laggards face no or little penalty, while early movers are hampered by fragmentary information, and inappropriate and inconsistent regulation.

Most worrying, perhaps, is that concern about climate change has fallen among those sectors most exposed. CSIRO has said that companies reporting they have carried out vulnerability assessments dropped from 60 to 47 per cent between 2008 and 2010.

Infrastructure is highly interdependent: when one asset is damaged others may also be impaired. Despite some examples of collaboration, preparation for climate change tends to focus on organisation-level risk management. The implications of climate change for interdependent sectors, assets, industries, and communities remain largely underexplored.

2019

Coming Ready or Not

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PLAYING FAIR

We’re all too familiar with climate change as an environmental, political and economic issue, but how often do we think of climate change as an issue of fair play?

One of The Climate Institute’s key areas of work entails putting Australia in a global context. We look at what we do at home and how this influences global climate action and diplomacy, as well as tracking the actions of other nations and the impact on our national prosperity in the long-term.

Australia’s climate diplomacy

Under the United Nations Framework Convention on Climate Change (UNFCCC), countries are now in the process of defining a new binding agreement that will cover commitments by all major emitters including the USA and China.

A key milestone towards this agreement in 2012 was an agreement reached in Doha that new binding commitments for the period to 2020 would come into force under the Kyoto Protocol.

The Climate Institute engaged with all sides of politics, business and the policy community through 2012 to build understanding of the importance of Australia taking on a new Kyoto commitment in Doha as part of this process. This included analysis of the implications for business of being shut out of global carbon markets if Australia did not take on a new Kyoto target. In advance of Doha, the Coalition had given in principle support for participation in Kyoto’s second target period and this was followed by a firm commitment from the ALP Government to make an agreement under this treaty.

Through policy analysis and media engagement the Institute continued our position as a key commentator on these critical global processes.

International Accountability

Australia is very vulnerable to the impacts of climate change. What other major emitters do to address the problem is therefore very important to the wellbeing of our communities, the natural systems on which we depend, and to our overall economic prosperity. As a nation, how we approach and play our fair part in global solutions is critical to our long-term national interest.

In 2012/2013, the Institute’s work focused on a number of specific projects.

International agreements don’t reduce emissions, the actions of national governments and the policies that they put in place to drive investment in low-carbon solutions do. However, international agreements remain important in facilitating greater national ambition by giving governments the confidence they sometimes need that other nations are also acting to reduce emissions, and by setting up frameworks to facilitate low-carbon investment. For example, according to Bloomberg New Energy Finance, around three quarters of investment in renewable energy in developing nations between 2004 and 2011 was supported by the Kyoto Protocol’s carbon market mechanisms. A man works bailing

discarded plastic in Hubei Province, Central China.

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Both major political parties in Australia have committed to reduce emissions by 5-25 per cent on 2000 levels by 2020.

However, Australia’s efforts will not stop in 2020 and The Climate Institute undertook and released a policy brief that asked the question what should Australia’s overall contribution to a world seeking to limit warming to less than 2oC be? This formed a key part of our submission to the independent Climate Change Authority’s review of Australia’s emission reduction ambitions and discussion with policy makers and business on this question.

This paper found that defining Australia’s fair share of the global carbon budget consistent with 2oC is critical if short-term targets are to be set with clear reference to avoiding dangerous climate change.

For example, if the average Australian consumes no more of the global budget than the average person in other advanced economies then over the next 40 years we can only release 8 billion tonnes of carbon pollution. At current emission levels this budget would be consumed in around 15 years.

Like any budget, the more you spend early on, the less you have for later. If targets are set without reference to a long-term and fair national carbon budget, more draconian emissions reductions will be required after 2020 to meet national goals and international commitments.

The Climate Change Authority will release its final recommendations on Australia’s carbon budgets in early 2014.

Australia’s fair share of global efforts

International Accountability

Despite building new coal-fired power stations, China has an ambitious plan to source 20% of their energy from renewable sources by 2020.

Australians retain an appetite for doing something to combat climate change.

Rural Australia is at the forefront of the threats and opportunities of climate change.

A vivid reminder of what goes to waste. And what opportunities exist finding new ways to use discarded materials.

A solar thermal facility near Newcastle, New South Wales. Australia has huge untapped solar potential.

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Our ability to influence global action and respond in an economically efficient way ultimately rests on the credibility, ambition and effectiveness of our domestic policy framework to unlock large-scale investment in low pollution technology across the economy.

The ability of a nation to build an economy in a world limiting pollution is a key measure of how it will provide prosperity to its citizens in the future. In partnership with GE, The Climate Institute released the updated G20 Low-Carbon Competitiveness Index, as part of the Global Climate Leadership Review 2013.

This economic analysis found that Australia has staged a fragile reversal in its previously declining low-carbon competitiveness. It also highlighted that Asia, especially China, is now taking centre stage in preparedness for the low-carbon economy.

Three of the top five best placed countries are now in Asia—France, Japan, China, South Korea and the UK make up that list. China has leapt ahead of its previous score: it is now 3rd up from 7th. If China had not increased its clean energy investments, it would be in 8th place.

Australia is 17th but has slightly improved its low-carbon competitiveness due to a number of factors along with relative good economic health, increased investment in infrastructure and to a lesser extent education and a slight increase in energy efficiency in the transport sector.

The Institute also released an update of the Global Climate Action Map—an interactive online tool that allows users to see the commitments countries are making and the carbon pricing, renewable energy, regulations and other policies in place.

Along with leading carbon market analysts in China, Climate Bridge, we also released an information paper that outlined the history of climate policy in China and the substantial progress made in building policy frameworks to reduce pollution and drive clean energy investments. In advance of President Obama’s recent climate policy initiatives, we also produced a similar brief on the climate policy of the USA.

Part of the Institute’s strength internationally is our ability to engage with leading independent institutions around the world. This includes being part of the World Resource Institute’s Open Climate Network that brings together independent policy groups in the USA, China, the EU, Canada, Japan, Brazil, South Africa and other major economies to review the national action countries are taking.

In a similar, but separate initiative, The Climate Institute also contributed to the release of a white paper on international progress on carbon capture and storage. This was part of the work undertaken by a global network of climate change groups who track practical and policy developments on this important technology and was released in Doha with the former head of the International Energy Agency.

Australia’s place in the world of climate action impacts us all. How other nations respond will impact on our export industries—in particular coal and gas—but also on the costs we pay for the clean energy technologies we import. And if the world does not act decisively, we will suffer disproportionate climate impacts compared to other advanced economies. Our ability to influence global action and respond in an economically efficient way ultimately rests on the credibility, ambition and effectiveness of our domestic policy framework to unlock large-scale investment in low pollution technology across the economy.

Tracking progress towards a global low pollution economy

International Accountability

Global Climate Leadership Review 2013The second of our reports into climate action around the world and how Australia is currently performing against other countries.

Supported by GE

China continues to seek ways to lower its pollution and increase the welfare of its growing population.

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International trends point to growing momentum for emissions reduction policies and actions. Massive investment in clean energy, led by the USA and China, has seen technology costs fall and renewable generation capacity increase by 18 per cent since 2010. The number of countries with renewable energy targets has increased to 138, up from 109 in 2010. Emission trading has expanded to 40 countries, including parts of China and the USA. Regulations to cut pollution from specific sectors such as vehicles, buildings and power stations are gaining momentum in the USA, China, the EU, and Canada.

Australia is not well-positioned for prosperity in a carbon-constrained world: it has an emission-intensive electricity system, heavy dependence on fossil fuel exports, and high levels of energy waste. These historic sources of wealth could well become economic liabilities in a carbon constrained future.

And Australia could be left behind — countries responsible for almost half of today’s total emissions are currently examining carbon pricing that could be implemented by the end of the decade.

Prices and limits on carbon make permitted emissions scarce and valuable, which means that boosting the productivity of carbon emissions is central to maximising prosperity in a carbon-constrained world.

How is this done? Carbon productivity is derived primarily from two factors: increasing the efficiency of energy use and reducing emissions from the energy supply. Much of The Climate Institute’s policy analysis in the last 12 months has focused on these two solution drivers.

In terms of energy use, in recent years there have been some encouraging signs of progress. Industrial energy efficiency improved at a higher than historic rate (1.3 per cent per year since 2007, compared to about 0.5 per cent previously). Electricity consumption has continued to fall since 2010.

Emissions from electricity are down 13 per cent from their high in 2008. Over one million households have solar PV panels. Carbon policies, particularly the Renewable Energy Target (RET) and the carbon price, have played major roles in these shifts, with no detrimental impact on the economy. The first year of carbon pricing saw GDP growth of 2.6 per cent.

However, these trends are fragile and remain insufficient to reorient Australia’s economy on a low-carbon pathway. Domestic policy developments over the year were generally driven by short-term political realities: the planned floor price for the Australian emissions trading scheme (ETS) was dropped, in part to satisfy lobby groups, in part to hasten linkage with the EU ETS. A range of carbon and clean energy programs suffered repeated budget cuts to help plug the federal deficit and the government agreed to reduce the frequency of reviews of the RET but failed to legislate this.

The Climate Institute has emphasised the opportunities and imperatives of boosting Australia’s carbon productivity. Our Clean Energy Amendment Bill submission argued for keeping and extending a rising floor price within the ETS to drive domestic investment in low-carbon solutions. Our Renewable Energy Target (RET) Review submission to the Climate Change Authority supported maintaining the current fixed target and holding reviews every four years instead of two to reduce investor uncertainty, views that aligned with the Authority’s final recommendations.

Towards carbon constraintsMomentum is building as the world starts to shift to a place where carbon has limits and every nation needs to play its part.

Tentative progress. More to do

The renewables race is on. Will Australia lead the way or be left in the dust?COMPETING

IN A CARBONCONSTRAINEDWORLD

Against these global trends Australia’s recent progress has stalled and there is a high risk that we will head backwards. Our work in the last year has continued to explore the risks and opportunities in this rapidly emerging new global economy.

Economic Transformation

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China now gains as much export revenue from solar panels as it does from shoes. Solar exports earned the country a staggering $36 billion in 2011 alone.

Unburnable CarbonA groundbreaking look at Australia’s exposure to the building carbon bubble.

Supported by The Mullum Trust and Dara Fund No 2

An endless solar farm under construction in Gansu Province, China.

The Global Climate Action Review 2013 highlighted key trends that will affect Australia, particularly the shift in investment momentum from Europe to Asia and the spread of carbon markets and other policies. An update of our Low Carbon Competitiveness Index revealed that Australia continues to lag behind comparable G20 economies.

Our Unburnable Carbon report showed that expansion of Australia’s resource exports not only increases carbon emissions, but represents a significant economic risk to the nation. The $6 billion Australia spends each year on developing its coal reserves is a poor investment in the face of clear evidence that the use of that coal is incompatible with a relatively safe climate—and that our key markets are already taking steps to reduce their coal use.

Economic Transformation

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For Australia, a 1 per cent increase in energy efficiency would boost 2030 total GDP by $26 billion.

Our Boosting Australia’s Energy Productivity policy brief used analysis by Vivid Economics and ClimateWorks to show that Australia stands to boost GDP by billions of dollars if it lifts its game on energy efficiency. Vivid Economics’ finding that a 1 percent economy-wide improvement in energy efficiency raises GDP per capita by 0.1 percentage point was fleshed out by ClimateWorks’ assessment of sectors’ energy savings and opportunities. This work found that major industry still leaves $2 on the table for every $1 they save and key sectors such as transport and buildings have significant energy waste.

These and other pieces of analysis fed into our pre-election work. One of the three focuses of our Climate policy tests for the 2013 federal election was the extent to which political parties’ and players’ commitments would accelerate low-carbon investment. Scores were informed by deep analysis of the legislated carbon policy framework and independent modelling of the Coalition’s policy proposals. The latter found that by 2020 carbon productivity would increase by 10 per cent under the carbon laws, but only 6 per cent under the Coalition’s plan. Both, however, compare poorly with the global average rate of 40 per cent improvement needed for a two degree world.

The carbon laws in place give Australia the ability to meet the top of its 5-25 per cent target range. However, our exposure to international markets risks overreliance on overseas offsets at the expense of deeper emission cuts at home.

The Climate Institute advocates strongly for complementary policies to build certainty in renewable energy investment and unlock Australia’s energy efficiency potential. Such policies include stabilising the Renewable Energy Target (RET), establishing a robust national Energy Saving Initiative, setting declining emission performance standards for existing power stations and introducing emissions/economy standards for Australian vehicles in line with those in place overseas.

Should the carbon laws be repealed, the need for complementary policies sharply increases. Without an explicit carbon price, businesses face no clear investment signal, which increases their carbon and regulatory risk.

Given the global trends, carbon pricing is widely expected to return in some form but regulatory interventions may be made in the interim. Hedging against this uncertain future imposes costs throughout the economy and severely diminishes Australia’s ability to capitalise on emerging low-carbon solutions.

The speed at which solar PV was taken up across the country surprised everyone and created distortions that persist to this day. The next wave of disruptive technologies coming to transform our high-carbon economy to a low one—whose arrival can be anticipated but not prevented—will show whether Australia can learn from its past or is doomed to repeat it.

Economic Transformation

Boosting Australia’s Energy ProductivityEnergy efficiency has been largely forgotten during the recent carbon price furore. This policy brief looked to redress that balance.

Supported by GE, Vivid Economics and Climateworks Australia

Retreat is a false economy

Our outdated power network needs to be brought into the 21st Century.

Our dependence on fossil fuels for power continues to threaten Australia’s prosperity.

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Sustainability is defined as “the ability to be sustained, supported, upheld, or confirmed.” When it comes to climate change, this requires a multi-faceted partnership approach across society.

The Climate Institute was established with this multi-faceted approach in mind, and has sought to work across sectors and with almost every imaginable group—whether it is civil society, business, government, academia or others—to find sustainable solutions. This last year found us more than ever working with various alliances, networks and partnerships towards unified and targeted action on climate change.

Election Focus

A Sydney father shows his support for stronger climate action as part of the Vox Pop series for Climate of the Nation.

Climate of the NationOur fifth report into Australian attitudes to climate change took place one year on from the start of the carbon laws and in the lead-up to the Federal election.

Supported by the Dara Fund No 2 and the Digger & Shirley Martin Environment Fund

Societal Leadership

SEEKINGSUSTAINABLESOLUTIONS

A key focus for us over the year was to measure the extent to which the federal election was seen as a “referendum on the carbon tax”. Public polling we carried out in early and mid-2013 towards Climate of the Nation 2013 showed this not to be the case with other issues dominating. Further polling on Election Day validated this finding, and in fact revealed that more Australians want to see the Coalition honour its election promise of achieving a 5-25 per cent emissions reduction target than to repeal the carbon price.

Polling has also revealed diminishing confusion around the science and a growing understanding that climate impacts are real and happening now. Significantly, it found that a growing majority of Australians want their nation to be a leader in finding climate solutions. That number was on the upswing for the first time since 2007, when The Climate Institute first started tracking public attitudes towards climate change in Australia.

Numerous partnerships were engaged in our research, including the private sector, NGOs and Climate Partners. JWS Research conducted most of our polling and with some further collaboration with AMR, the research arm of Climate Partner Ogilvy Earth. WWF was a close collaborator and shared the results of its own polling and survey work, as did the Business for Clean Economy alliance (B4CE).

Another alliance that was particularly useful during the election campaign was the Southern Cross Climate Coalition (SCCC). This group, comprised of the Australian Council of Trade Unions, the Australian Council of Social Service, the Australian Conservation Foundation, and The Climate Institute, put forward a joint statement arguing that Australia can only achieve prosperity, competitiveness and fairness in the 21st century with stronger climate policies that improve carbon and energy productivity. The CEOs of these organisations stood together behind this message, including in a joint opinion article that was published in national press.

Issues of prosperity and competitiveness were highlighted in the Global Climate Leadership Review 2013, which saw Australia rank 17th among the G20 in its ability to compete in the global low carbon economy. (See the Playing Fair section of this review for more details.)

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Working with Business

Economic Transformation

Coming Ready or Not Understanding climate impacts for business. Key work through the year continued to analyse the likely impacts of climate change on business - and the opportunities for forward-thinking organisations.

Throughout the year we undertook a number of flagship projects in partnership with our Climate Partners and other businesses.

Coming Ready or Not: Managing climate risks to Australia’s Infrastructure included a survey of business leaders on low-carbon readiness.

Discussing ways to communicate the climate challenge at the Sydney Theatre Company.

Becoming a Climate Partner

The Climate Institute has always viewed business as having an essential role in working towards the long-term sustainable solutions that are needed to transform Australia to a zero carbon economy and culture. The challenging nature of the current political environment in Australia is only making the role of business more important.

We have been working with a select group of leading businesses through our Climate Partner program since 2010. Our current partners are leaders in sectors such as finance, energy, infrastructure, transport and communications. They include Lead Partner Westpac/BT; Major Partners KPMG, Mirvac, Ogilvy Earth and Pacific Hydro; and Climate Partners AGL, Australia Post and GE.

2012-13 saw us continue to deepen our various business relationships. The joint work we undertook was particularly important given the constantly evolving landscape of climate change policy.

We look to Climate Partners to both partner on strategic projects and bring an expert business view to help inform the research we undertake.

Highlights through the year included our ground-breaking resilience project Coming Ready or Not: Managing climate risks to Australia’s infrastructure, which we undertook with Westpac, Mirvac, KPMG, Bond University and Manidis Roberts. On the Global Climate Leadership Review 2013 we once again partnered with GE for the Low Carbon Competitive Index.

Other work included an analysis of Australia’s energy efficiency opportunities with AGL, some joint work on renewables and the Climate of the Nation 2012 project with Pacific Hydro, ongoing social media innovation with Ogilvy Earth and general business analysis with Australia Post, among others.

With all of our partners we were involved with regular business roundtables where we explored various climate related issues and opportunities facing business.

Outside of the Climate Partner program, we continued to engage and interact with business on a range of levels; from our work with the B4CE initiative to high level briefings of senior business leaders. We also continued to seek new and effective ways to engage with individual businesses and their associations.

We are currently looking to work with a limited number of additional Climate Partners and there are also a variety of other ways in which we partner with business, so we welcome contact from forward-looking companies at any time.

To discuss partnership options with The Climate Institute, please email us at support@climateinstitute.org.au or call +61 (0)2 8239 6299.

As well as the programs and initiatives we undertake with our Climate Partners, we also receive important support both financially and through pro-bono donation of time and relevant resources*. We are careful to be transparent about our relationship with all of our partners and have clear agreements to guarantee the independence of all involved. We won’t (and don’t) agree on all things, all the time, but the rigour of engagement helps ensure that our policy ideas are ambitious and achievable.

For full details on our partnership due diligence process please contact us at info@climateinstitute.org.au or call +61 (0)2 8239 6299.

* We ensure the majority of our funding comes from independent, philanthropic sources and have strict governance policies at a board level. In 2012-13 the total financial support from our Climate Partners was less than 15% of overall income.

Lead Climate Partner

Major Climate Partners

Climate Partners

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The hidden investment solution to climate change

Australia’s carbon bubble

One of the highlights of our year was the release of a report defining Australia’s carbon bubble. Developed in association with the UK-based Carbon Tracker Initiative, this work found that Australia’s coal resources potentially consume three quarters of a precautionary global carbon budget.

Driving disclosure from asset owners

The citizen investor

In December 2012, the AODP released the first ever global climate index showing how the world’s biggest investors, including superannuation funds, are managing climate risk.

The Index was built following information requests to the world’s 1,000 largest asset owners including over 800 pension funds, 80 insurance companies, 50 sovereign wealth funds and 50 foundations/endowments.

We found a crisis of transparency, which endangers the superannuation and pension funds of millions of people around the world, including many Australians. Work for the survey this year is ramping up as this report goes to press. It is expected that the number of assessed funds will grow from 300 to 400.

While the AODP exerts top down pressure on the world’s largest asset owners, the Vital Few campaign is a grassroots social media campaign empowering individuals to find out if and how their superannuation and pension funds are managing their investment with climate risk in mind.

The Vital Few has been piloted in Australia, the UK and Canada with very positive results. Whilst membership is still in its early days (about 1,300 members), the information gathered on how these funds manage or don’t manage climate change risks has been illustrative of the need to change practices in the investment world.

The Climate Institute has been at the forefront in examining assumptions behind superannuation fund investment decisions and the extent to which climate risk is integrated. 2012-13 saw us continue to focus on this area.

Exploring broader societal implications

Investment in low-carbon solutions is not only an economic positive, but also leads to a healthier world. Over the year The Climate Institute continued to highlight the importance of considering health and wellbeing in the climate change debate as part of our focus on ensuring the society-wide impacts of climate change continue to be better understood.

This year we highlighted the health benefits of addressing climate change through a joint report with the Climate and Health Alliance, Our Uncashed Dividend: The Health Benefits of Climate Action. This builds on our previous work in the health space, focused on the impacts of rising temperatures and other climate impacts on mental health. We partnered with the Climate and Health Alliance and were supported by the Australian Medical Association and the Australian Healthcare and Hospitals Association, among others, for this work.

The report emphasised that actions that cut carbon pollution can improve Australians’ health and could save billions of dollars and thousands of lives each year.

Throughout the year we launched a number of reports highlighting the dangerous impacts of climate change, with medical and health professionals, including Professor Tony McMichael, one of the world’s preeminent experts of public health and climate change and a Board member of The Climate Institute.

The next generation of Australians face increasing climate risks.

Many in rural areas see themselves as being on the climate front line.

Our work delved deeper into the health benefits of climate action this year.

Economic Transformation

AODP Global Climate Index and The Vital Few web platform.

Societal Leadership

Engaging our audiences effectively

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The Vital Few project outlined on the previous page is just one example of how we have sought to continue to communicate and engage more effectively.

The Climate Institute has continued its role as media commentator on Australian climate action domestically and in international press.

Our role as a translator of the science, and an independent voice communicating the threats, opportunities and solutions associated with climate change, has also continued through the ongoing development of our flagship research reports and context guides.

The striking imagery of Creative Fellow Michael Hall, who will continue on with the Institute in 2013/14, has been instrumental in humanising the complex, all-encompassing climate change issue. This Fellowship was only possible with the support of Michael Kantor & Silvia Frassoni and the Nelson Meers Foundation.

An evolved website presence, increased activity through social media channels, and the continued distribution of interactive content, from videos to infographics, has seen our online reach expand and give voice to more Australians concerned about the health of their nation in the face of dangerous climate change. Interactive tools such as the 2013 Pollute-o-Meter, which allowed people to explore the climate policies of the major parties and Independents, are increasing the number of people engaged with climate change.

Our interactive global climate action map, Vox Pop videos around public opinion, and growing portfolio of infographics and slideshare presentations have also been very useful in building a base, whether among concerned citizens, policymakers, business, or media.

The need to find ever more effective and engaging ways to communicate is an ongoing strategic priority for the Institute.

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5 critical years ahead

Sam MeersBoard Member of The Climate Institute since 2010Chair of Development Sub-Committee since 2012

2012-13 was another rollercoaster year for those of us committed to accelerating action on climate change. There was the high of the carbon laws coming into effect at the start of the year, and the lows of Australia’s ongoing toxic climate politics.

Yet amidst the fog of rhetoric, one thing is clear: strategic and concerted action over the next five years is critical if Australia is going to realise The Climate Institute’s 2050 vision of a resilient nation prospering in a zero-carbon world. A strong, independent and evidence-based voice is vital if we are to overcome the inherent challenges to building and sustaining momentum in these critical years.

With The Climate Institute’s seed funding from the Poola Charitable Foundation (Tom Kantor Fund) drawing to an end, and in order to sustain its unique and innovative blend of research and communication, this year has seen the Institute focus on a number of initiatives aimed at diversifying its funding base and extending its reach.

We were excited to launch our innovative 50 for 5 for 2050 program earlier this year, through which we are building a network of 50 supporters to fund core work over the next five years. We already have 20 members of this group, and their generous support is enabling us to accelerate some of our core pathways and projects and to build our own resilience for the 5 critical years ahead. The 50 for 5 for 2050 program has also enabled us to engage with a broader audience, and we will be actively recruiting additional members over the coming year.

We also initiated our Boardroom Lunch series in Sydney and Melbourne for current and potential supporters. Fellow Board Member Andrew Demetriou memorably led engaging discussions around his commitment to climate action and the post-election policy framework at two of these events. We intend to host more such events next year.

Towards the end of the year, we ran our first ‘traditional’ fundraising campaign, the Carbon Crunch 2013 Appeal. This was an important tool to assist us in building new audiences and connecting with existing supporters – another initiative to build on this coming year.

Another development was the expansion of the Development Sub-Committee with Sarah Brenan and Dr Noel Purcell joining Andrew Demetriou, Simon Holmes à Court, Michael Kantor, Adam Kilgour, Clare Martin, Mark Wootton, Richard Plumpton and myself.

I would like to offer my deep thanks to each member of the Group for their support throughout the year—particularly given the workloads they each carry outside their involvement with the Institute.

I’d also like to pay tribute to the Board of The Climate Institute, in particular our CEO John Connor and our mighty Chair, Mark Wootton, for the support it gives to the Development Group by ensuring that The Climate Institute takes a whole-of-organisation approach to fundraising. And—last but not least—I’d like to thank The Climate Institute’s Development Director, Richard Plumpton, whose energy and enthusiasm sustains us all.

The climate challenge is considerable, but not insurmountable. The Climate Institute is uniquely positioned to identify and accelerate the pathways to change, and we will continue to strive for realistic and achievable solutions to the climate challenge with unfailing optimism.

I encourage you to utilise every resource available to you and join with us in the journey to build a resilient and prosperous future for this ‘sunburnt country’ of ours.

A view from within

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Andrew Demetriou Board Member of The Climate Institute since May 2010

To discuss ways you can support The Climate Institute—including how to join the ‘50 for 5 for 2050’ program—or if you would like further information on the organisation’s funding and support structures, please contact Richard Plumpton at support@climateinstitute.org.au.

But we are not a green party or a lobby group. By seeking most of our financial backing through private philanthropy, the Institute is unique in that it is focused on climate solutions through strategic, independent investment. This independence is critical as it gives us the freedom to make realistic assessments and analysis without the burden of other agendas.

Through private investment we have already played a part in influencing thought leadership around the need to ensure the largest polluters are accountable for their carbon output. We’ve developed ground-breaking analysis of the financial sector’s role in investing in low-carbon solutions and delivered reports on climate risks to Australian industries.

We’ve done this through evidence-based research; the Institute isn’t interested in operating on guesswork or the prevailing ideology of the day.

This is an organisation that is made up of decent people with strong values. In many ways it’s really that simple. Frankly I wouldn’t be involved with this organisation if I didn’t think their moral code was robust. It simply wouldn’t work.

As a country we now have an opportunity to take the lead on a global scale and actually exert influence on others.

By any measure we simply cannot afford to fail to respond to what is happening around us and that brings me back to why I’m involved with The Climate Institute.

The next period is pivotal in shaping this country’s climate future.

With an ever-changing political landscape, there are key challenges ahead and now is the time to be developing a sustainable blueprint that properly addresses the issues at hand.

Now is the time to work with business and the private sector to drive change through significant investment.

Now is the time to keep all political parties on their toes and ensure they are ready to engage and address our initiatives and thinking.

Now is the time to re-assess what the future looks like.

I would ask that you support the Institute’s crucial work as we enter a vitally important phase on this issue. You have the opportunity to be a part of the solution—a solution that offers a clear pathway to a low-carbon future.

The Climate Institute will continue to make a difference locally and globally, we hope you can be a part of driving those outcomes.

In my role with the AFL I talk to a number of people about a range of issues, and naturally some of them are closer to my heart than others. The issues I encounter in the AFL are vast; they touch people from every conceivable walk of life. Some resonate on a personal basis more than others. As a board member of The Climate Institute, I’m engaged on an issue that is important in so many ways.

When thinking about how best I could provide a clear understanding of what the Institute is about and why I’m involved with it, I realised you probably don’t need to hear in detail how climate change is impacting us locally and globally.

You may not want to focus on the fact that climate change is gravely affecting the way we live and the way our children will live in decades to come. You may not want to be told of the effect it’s having on infrastructure and industry or the dangerously high global levels of CO2 we’re currently faced with. Or how Australia is at risk of being left behind in terms of sustainable, meaningful climate solutions and runs the risk of failing in its claim to be a vital and progressive part of a low-carbon future. Indeed you may not wish to know that we’re now finding even the most conservative voices, like the World Bank, highlighting the dangers of climate change and the need for immediate action.

I realise you may not be reading this Annual Review to look at this side of the debate.

Instead I want to give you a clear and simple picture of this organisation and its values. Quite simply, The Climate Institute is passionate, informed, apolitical, independent, results driven and is focused on creating a positive legacy for Australia.

When it comes to the climate challenge, this country too often operates in an environment focused on short-term thinking. Investment and economic policy are geared towards immediate, unsustainable solutions that will ensure future generations bear the cost.

The Institute—through a strategic, collaborative approach based on independent investment—has a clear objective of re-shaping the public debate towards long-term, workable solutions. It seeks to elicit meaningful, sustainable outcomes through engaging those in the community, in government and in business that have the ability to affect real change. This collaborative approach is imperative; we cannot continue to rely on individual actions alone.

Clearly the role of governments is vital and has never been more important than right now. Left to its own devices, without the informed, critical eyes of an organisation such as The Climate Institute, government would be less informed.

The Climate Institute Team The achievements detailed in this report would not have been possible without the dedication of all those who have worked at The Climate Institute in the past year. As a highly networked organisation, we have a small full-time team of 11 people, but we would also like to acknowledge all those who made such valuable contributions to our 2012-13 work.

The Team

The Team

4847

CEO

John Connor

Communications Manager

Garrett Stringer

Administrative Officer

Jenny RecioRegional Projects Manager

Corey Watts

Office Manager

Esther Green

Investment Analyst

Fiona Skewes

Deputy CEO

Erwin Jackson

Development Director

Richard Plumpton

Policy + Research Manager

Olivia Kember

Communications Director

Kristina Stefanova

Business Director

Julian Poulter

The Board

5049

The BoardOur Board is a critical part of our effectiveness and is deliberately made up of independent individuals with a broad range of skills and expertise. The breadth of experience ranges from climate science experts to business leaders; from community leaders to former politicians. This unique mix aligns closely to our ongoing role working with all parts of society to try and find solutions to the growing threats of climate change.

Strategic CouncilOur 67 member Strategic Council forms another important part of The Climate Institute. Made up of scientific, business, community and NGO leaders, it provides ongoing strategic input to our research projects as well as playing an important governance and guidance role.

Susan Jeanes is the Chief Executive of the Australian Geothermal Energy Association, the national body representing the Australian geothermal energy industry. She is also the Principal at Susan Jeanes and Associates and is Chair of the Advisory Board at the University of Adelaide’s South Australian Centre for Geothermal Energy Research. Susan has previously served in a number of advisory roles in the clean energy research sector and has worked in the political arena, serving in the Federal Parliament as the Member for Kingston. Susan has also worked as an Advisor to the former Environment and Heritage Minister Robert Hill on climate change and energy policy and advised a number of shadow ministers in various portfolio areas prior to 1996. She also held the position of Chief Executive of the Renewable Energy Generators of Australia until October 2007.

Susan Jeanes

Samantha Meers (BA LLB M Litt FAICD) is Executive Deputy Chairman of property and investment group, the Nelson Meers Group, and co-founder and trustee of the Nelson Meers Foundation. Over the past decade, Ms Meers has also held a diverse portfolio of board appointments across the not-for-profit sector. Ms Meers’ current directorships include: deputy chairman of Creative Partnerships Australia; a trustee of the Art Gallery of NSW; a director of the State Library of NSW Foundation and the Sherman Contemporary Art Foundation; and a member of the Advisory Council of the Centre for Social Impact at the University of New South Wales. Previously, Ms Meers practised as a corporate lawyer, subsequently holding senior management positions in the media sector. She was recently recognised as the most influential woman in Australian philanthropy at the AFR/Westpac 100 Women of Influence Awards.

Sam Meers

Mark Wootton (Chair) is the Principal and Manager of Jigsaw Farms, a family farm enterprise north of Hamilton, Victoria, covering 14,500 acres. Jigsaw Farms is a beef and sheep farm with large tracts of biodiversity plantings, wetlands and agroforestry. Mark holds a Diploma of Agriculture, a Graduate Diploma of Education and a Geography Degree from Monash University.

Mark Wootton

Andrew Demetriou has been CEO of the Australian Football League (AFL) since 2003. He is a former teacher in business, law and politics and played in the AFL. Andrew was appointed Managing Director of the Ruthinium Group in 1989, a position he held until his appointment as CEO of the AFL Players Association in 1998. Andrew remains a director of Ruthinium Group which is one of the world’s largest manufacturers and distributors of acrylic teeth, exporting to over 70 countries worldwide.

Andrew Demetriou

Clare Martin brings a wealth of experience to The Climate Institute through her work in journalism and public life. Clare was elected to the Northern Territory Legislative Assembly in 1995 and appointed Opposition Leader in 1999. She was elected the Northern Territory’s first Labor Chief Minister in 2001 and served in that capacity until 2007, retiring from Parliament in 2008 to become CEO of the Australian Council of Social Service. In 2010, Clare took up an appointment as Professorial Fellow at Charles Darwin University. Now, she runs her own Communications and Strategy business in Darwin.

Clare Martin

Adam Kilgour is Managing Director of Diplomacy Pty Limited. He is a former adviser to Victorian and Commonwealth Government Cabinet Ministers and founder of public affairs firm CPR. He has also been a Managing Director of the ASX-listed Photon Group Ltd and is Chairman of Stirling Henry Global Migration. In 2013 he became Chairman of the New South Wales Trainers Association (NSWTA)

Adam Kilgour

John Connor (CEO) joined the Institute in March 2007 after working as Campaigns Manager at World Vision where he was also a co-convenor of Make Poverty History. Prior to that he has been a leader in environment organisations like the Australian Conservation Foundation and the NSW Nature Conservation Council. John has worked on numerous government and business advisory panels currently including the NSW Government’s Climate Council. He is a Board member of the Environment Defenders Office and the Asset Owners Disclosure Project and is a “Governator” with the Australian Youth Climate Coalition.

John Connor

Dr Graeme Pearman was elected to Fellowship of the Australian Academy of Science in 1988, the Royal Society of Victoria, 1997 and the Australian Academy of Technological Sciences and Engineering, 2005. He has been a member and chair of many Australian and international meteorological/global change committees and is currently an Adjunct Senior Research Fellow at Monash University. Graeme was the former head of CSIRO Division of Atmospheric Research. He was also a recipient of a United Nation’s Environment Program Global 500 Award in 1989 for his active involvement in a national awareness program on climate change and in 1999 he was awarded the Australian Medal of the Order of Australia for his services to atmospheric science and promotion of the science of climate change to the public.

Graeme Pearman

Dr Hugh Saddler is currently a Principal Consultant with Pitt&Sherry and the Managing Director of SustainAbility Advice Team Pty Ltd. He is also an Adjunct Professor at the Australian National University. He has a degree in science from Adelaide University and a PhD from Cambridge University. He is the author of a book on Australian energy policy, Energy in Australia, and over 70 scientific papers, monographs and articles on energy technology and environmental policy, and is recognised as one of Australia’s leading experts in this field.

Hugh Saddler

Jenny Merkley (treasurer) is an Associate Director at KPMG in the Climate Change and Sustainability group. Jenny is a member of the Institute of Chartered Accountants in Australia (ICAA) and previously worked in the financial services audit division and accounting advisory group at KPMG. Jenny holds a Bachelor of Business (Accounting) from UTS Sydney, and a Masters in Environmental Management (UNSW).

Jenny Merkley

Emeritus Professor Tony McMichael is an environmental epidemiologist at the Australian National University (ANU) in Canberra, with a long record of research and publication. During 2001-2007 he was Director of the National Centre for Epidemiology and Population Health at ANU. He headed that Centre’s research program on Climate, Environment and Health during 2002-2012. Over the past several decades he has advised the World Health Organization, the UN Environment Program and the World Bank on matters of environmental and climatic risks to health. During 1993-2007 he played a central role in the assessment of health risks due to climate change for the UN’s Intergovernmental Panel on Climate Change as an Australian Government-nominated scientist. In 2011 he was made an Officer of the Order of Australia and an elected member of the US National Academy of Sciences for his work on this topic.

Tony McMichael

Partners + SupportersThe Dara Fund No 2Poola Charitable Foundation (Tom Kantor Fund)Eve Kantor & Mark WoottonMichael Kantor & Silvia Frassoni (Palombara)Hamer Family FundSarah & John BrenanDigger & Shirley Martin Environment FundPeter MartinMilan & Anne Kantor (Darinka)Simon and Katrina Holmes à CourtJulie KantorNelson Meers FoundationSurroweeKate KantorMartin Kantor (Stromovka)The Mullum TrustSam Meers & Richard KuoDr. Graeme & Irene PearmanProfessor Tony McMichaelAustralian Communities FoundationSally Perrini (Pace Foundation)Fairer Futures FundSteve Rothfield & Jackie YowellDavid LewisAustralian Environmental Grantmakers Network (AEGN)

The Climate Institute Board & Strategic Council Members

Department of Climate Change & Energy Efficiency (DCCEE)European Climate FoundationNSW Department of Environment & Climate Change Staff of the NSW Premier and Cabinet DepartmentVictorian Government Department of Sustainability & EnvironmentBond UniversityClean Energy CouncilEnergy Efficiency CouncilClimate BridgeGlobal Carbon Capture and Storage Institute (GCCSI)Southern Cross Climate Coalition

AECOM ANU’s Climate Change Institute Australian Conservation Foundation (ACF) Australian Council of Social Service (ACOSS) Australian Council of Trade Unions (ACTU) Australian Ethical Investment Australian Institute of Superannuation Trustees (AIST) Australian Religious Response to Climate Change Australian Youth Climate Coalition (AYCC) Circul8 Climate Action Network Australia (CANA) Climate and Health AllianceClimate BridgeClimateWorks CHOICE EcoPerspectives Ernst & Young GetUp!

Global Climate Network Green Building Council of Australia Greenpeace Australia PacificIdeascorpMichael HallNetBalance Open Climate NetworkOxfam Property Council of Australia Southern Cross Climate Coalition SKM-MMA World Resources Institute World Vision World Wildlife Fund (WWF)

Jim AllenRachel BarleyDavid BeattieJohn BennettIan BowieCaroline BrownKristine CarrC CurnowSimon DivechaAndrew DyePeter EckersleyBob ErnstCassie FarrellChristine ForsterCharles GutjahrJoe HallensteinPip HeleneBrad HendersonLorraine IrwinDaniella KaySimon KelleyRachel KerryAnnalisa KoemanKaren Large

Vida LayAlister Lee Raymond ManlyBarrie MayDylan NicholsonMichael O’BrienCarolyn PhiddianRob PyneHamish RussellJeffrey SandonRob SheehanMark SingerSimon SmithPeter W TaitJosh WodakAndrew WoodroffeBill WoodsHarley Wright

Gadens LawyersBaker & McKenzie LawyersManidis Roberts (recently acquired by RPS Group)Circul8GliderJWS ResearchOxygen IT SolutionsVivid Economics

Climate Partners Financial + In-Kind Support

Other Business Partners Financial + In-Kind Support

Individual Supporters

Other Partners

Core Supporters + Funders

Westpac KPMG Ogilvy Earth Pacific Hydro MirvacAGL Australia Post GE

Lead Climate Partner

Major Climate Partners

Climate Partners

As an independent not for profit organisation we are heavily dependent on our supporters and partners to enable us to deliver the ground-breaking research that we hope will continue to accelerate Australia’s transition to a zero carbon economy.

Whilst the list on these pages is not exhaustive, we would like to thank all those included here for their support of The Climate Institute over the last year.

We would also like to acknowledge the numerous scientists, economists and academics who have reviewed and/or advised our work, as well as all the generous anonymous supporters who have provided financial support.

5251

=+2012-13

Financial Snapshot 2012-13To see the full financial statements go to

www.climateinstitute.org.au/annual2013

5453

Financial Statements 2012-2013Director’s Report

Climate Institute (Australia) Limited A Company Limited By Guarantee ACN 116 713 592

Ingoings + Outgoings 2012-2013 Funding Sources 2012-2013

Comparison 2012-2013 + 2011-2012

Philanthropy 63.1%

Business 11.8%

Government 24.2%

Interest + Miscellaneous 0.9%

Profit $796,396

Revenue + Other Income $2,827,069

Outgoings + Expenditure $2,030,673

2011-2012

Income $3,379,188

Expenditure $3,381,827

Our ongoing focus on maintaining the majority of our support from philanthropic sources is once again clearly reflected above. It is worth noting that our proportion of funding from government was higher than usual in 2012-13 due in particular to a fellowship we commenced with the Global Carbon Capture and Storage Institute. We do not anticipate such a high proportion of funding from government sources in 2013-14.

It is also important to note that our income was higher than budgeted due to a significant grant for 2013-14 being provided early in the 2012-13 financial year. This led to a significant profit being reported in 2012-13, but, given our commitments for 2013-14 and forecast reduced fundraising income, we anticipate having to draw on our reserves this coming year.

We forecast ‘new and challenging waters’ on the fundraising f ront in last year’s annual review and that has proven accurate. Whilst we have continued our search for new sources of funds, we have not yet completed the transition to a broader sustainable funding model after the end of the Poola Charitable Foundation (Tom Kantor Fund) support. We are able to continue at a similar scale for the short-term by drawing on our reserves. However, unless we achieve broader support this coming year, we will need to adjust the scope and ambition of our work.

2012-2013

Income $2,827,069

Expenditure $2,030,673

This section is a snapshot of The Climate Institute’s financial statements for 2012-13. To see the full statements go to http://www.climateinstitute.org.au/annual2013

5655

Financial Statements 2012-2013Snapshot

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

Likely developments in the operations of the company and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the company.

The company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory.

No dividends have been paid or declared since the start of the financial year.

No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.

The company was not a party to any such proceedings during the year.

The long-term vision of The Climate Institute is a resilient Australia prospering in a zero carbon global economy, participating fully and fairly in international climate change solutions.

Our purpose is to catalyse and drive the change and innovation needed for a low pollution economy and culture.

The Climate Institute was established for the principal objects of raising public awareness of climate change and related issues and providing the development and implementation of policies on climate change and related issues.

Your directors present their report on the company for the financial year ended 30 June 2013.

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

The names of the directors in office at anytime during or since the end of the year are:

Mark Wootton

Adam Kilgour

Andrew Demetriou

Clare Martin

Graeme Pearman

Hugh Saddler

John Connor

Samantha Meers

Susan Jeanes

Tony McMichael

Jenny Merkley (appointed 30 November 2012)

The profit of the company for the financial year after providing for income tax amounted to $796,396.

A review of the operations of the company during the financial year and the results of those operations are as follows:

The review found the operations to be in line with the projected budget for the year ended 30 June 2013.

No significant changes in the company’s state of affairs occurred during the financial year.

The principal activities of the company during the financial year were:

Research into climate issues.

No significant change in the nature of these activities occurred during the financial year.

A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is attached to this financial report.

Signed in accordance with a resolution of directors:

Director: Mark Wootton

Director: John Connor

Date

Climate Institute (Australia) Limited A Company Limited By Guarantee ACN 116 713 592

Climate Institute (Australia) Limited A Company Limited By Guarantee ACN 116 713 592

Financial Statements 2012-2013Auditor’s Independence Declaration

Financial Statements 2012-2013Auditor’s Independence Declaration

To the directors of Climate Institute (Australia) Limited

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2013 there have been:

(i) No contraventions of the auditor independence requireraments as set out in the Corporations Act 2001 in relation to the audit; and

(ii) No contraventions of any applicable code of professional conduct in relation to the audit.

Geoffrey Robert Cuffe

Principal: Wearne & Co Audit Pty Limited Chartered Accountant

Date

30 September 2013

30 September 2013

5857

Note 2013 2012

Revenue 2 $2,824,506 $3,353,705

Other income 2 $2,563 $25,484

Employee benefits expense ($1,010,313) ($1,068,588)

Depreciation and amortisation expenses ($43,478) ($24,243)

Other expenses ($976,882) ($2,288,997)

Profit (loss) Before Income Tax Expense 3 $796,396 ($2,639)

Income tax expense - -

Profit (loss) for the Year $796,396 ($2,639)

Financial Statements 2012-2013Income Statement

Note 2013 2012

Profit (loss) for the Year $796,396 ($2,639)

Other Comprehensive Income: - -

Other Comprehensive Income for the Year, Net of Tax

- -

Total Comprehensive Income (expense) for the Year $796,396 ($2,639)

Financial Statements 2012-2013Comprehensive Income

Financial Statements 2012-2013Notes

1. Summary of Significant Accounting Policies

Basis of Preparation

The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The entity is a for-profit entity for financial reporting purposes under Australian Accounting Standards.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards (IFRS). Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless otherwise stated.

The financial statements, except for cash flow information, have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The amounts presented in the financial statements have been rounded to the nearest dollar.

(a) Revenue

Revenue is measured at the fair value of consideration received or receivable. Revenue is recognised net of the amounts of goods and services tax (GST) payable to the Australian Taxation Office.

The main sources of revenue include gifts/general donations, grants, Climate Partner fees and interest income.

Revenue from gifts

Philanthropic gifts and donations are recognised as revenue when they are received. Gifts may be directed towards specific projects, but there are no ongoing obligations associated with receipt of gifts. Gifts may be received from individuals, Foundations, Private Ancillary Funds (PAFs) and corporations, and a list of significant donors is included within the Annual Review.

Revenue from grants

Grants revenue is associated with specific projects, and contains an obligation to provide economic value through specific research or services. Grant revenue is recognised in the profit and loss when the entity obtains control of the grant and it is probable that the economic benefits gained from the grant can be measured reliably. Where milestones are attached to the grant which must be achieved before it is eligible to receive the income, the recognition of the grant as revenue will be deferred until those conditions are satisfied. Grants may be received from government departments, NGOs, Universities, individuals, Foundations, Private Ancillary Funds (PAFs) and corporations. Projects that have received grant funding are disclosed in the Annual Review.

Revenue from Climate Partners

Climate Partners are those organisations with whom a formal business partnership exists. Climate Partners contribute financially based on their level of agreed commitment. The contributions are associated with their status as a Climate Partner for an individual financial year. Revenue from Climate Partners is recognised as revenue in the year to which the contribution relates. Details of Climate Partners are included in the Annual Review.

Interest revenue

Interest revenue is recognised using the effective interest method, which for the floating rate financial assets is the rate inherent in the instrument.

6059

The financial statements cover Climate Institute (Australia) Limited as an individual entity. Climate Institute (Australia) Limited is a company limited by guarantee, incorporated and domiciled in Australia.

For the full Notes go to http://www.climateinstitute.org.au/annual2013

Liabilities

Current Liabilities

Trade and other payables 9 $110,084 $91,610

Provisions

Other

10

11

$66,702

$70,000

$80,815

-

Total Current Liabilities $246,786 $172,425

6261

Financial Statements 2012-2013Financial Position

Note 2013 2012

Assets

Current Assets

Cash and cash equivalents 6 $2,923,739 $2,002,169

Trade and other receivables 7 $159,541 $174,220

Total Current Assets $3,083,280 $2,176,389

Non-Current Assets

Property, plant and equipment 8 $64,063 $86,521

Total Non-Current Assets $64,063 $86,521

Total Assets $3,147,343 $2,262,910

Net Assets $2,860,703 $2,064,307

Equity

Retained earnings $2,860,703 $2,064,307

Total Equity $2,860,703 $2,064,307

Non-Current Liabilities

Provisions 10 $39,854 $26,178

Total Liabilities $286,640 $198,603

Financial Statements 2012-2013Changes in Equity

Retained Earnings

Total

Balance at 1 July 2011 $2,066,946 $2,066,946

Profit (loss) attributable to the member of the company (2,639) (2,639)

Balance at 30 June 2012 $2,064,307 $2,064,307

Balance at 1 July 2012 $2,064,307 $2,064,307

Profit (loss) attributable to the member of the company 796,396 796,396

Balance at 30 June 2013 $2,860,703 $2,860,703

6463

Financial Statements 2012-2013Profit and Loss Statement

Financial Statements 2012-2013Profit and Loss Statement

2013 2012

Income

Interest income $105,606 $145,785

Climate Partner fees $365,455 $355,455

Gift fund $2,216,642 $1,695,820

Special project grants TCI $136,803 $1,156,645

Other income $2,563 $25,484

$2,827,069 $3,379,189

Less Expenditure

Advertising - $1,377

Auditors’ remuneration $7,960 $8,160

Bad debts written off

Bank charges

$16,500

$2,375

-

$1,542

Consultants $138,024 -

Contingency $6,204 -

Courier Fees $1,978 $1,276

Depreciation $43,478 $24,243

Directors’ expenses $28,478 $37,304

Electricity $2,872 $2,476

Emissions offset $1,328 $3,079

Employees entitlements (439) $44,905

Food & Beverage $16,382 $4,375

Equipment $2,034 $792

Filing fees $179 $42

General expenses $4,654 $475

2013 2012

Less Expenditure cont.

Insurance $10,364 $10,127

IT Services $15,885 $7,447

Loss on sale of non-current assets $729 -

Media Monitoring & Productions $18,392 -

Income $2,827,069 $3,379,189

Less Expenditure $2,030,673 $3,381,828

Net Operating Profit (Loss) $796,396 ($2,639)

Retained profits at the beginning of the financial year $2,064,307 $2,066,946

Total Available for Appropriation $2,860,703 $2,064,307

Retained Profits at the End of the Financial Year $2,860,703 $2,064,307

Non-Government Organisations $10,500 -

Printing, design & stationery $28,714 $5,812

Project expenses $368,730 $2,085,500

Training $23,559 -

Rent $99,920 $100,133

Repairs and maintenance $1,336 $943

Research $6,050 -

Salaries and wages $931,522 $939,868

Staff training and welfare - $9,745

Subscriptions $33,791 -

Superannuation contributions $79,231 $83,816

Telephone

Travel

Website and social media expenses

$26,834

$92,167

$10,942

$8,391

-

-

$2,030,673 $3,381,828

As an independent organisation we are always looking for additional partners and supporters for the future challenges we face.

If you are interested in learning more about the different ways we work with individuals and organisations, please contact Richard Plumpton at support@climateinstitute.org.au

The images used in this book are courtesy of Michael Hall, our 2013-2014 Creative Fellow. The cover image depicts the devastating result of the 2009 Black Saturday bushfires in Victoria.

Our Creative Fellowship is possible thanks to the generous support of Michael Kantor & Silvia Frassoni and the Nelson Meers Foundation.

The Climate Institute works to minimise its own carbon footprint and promote sustainability within its office operations. The main office in Sydney occupies a resource-efficient, 5-Star Green Star space retrofitted by the Green Building Council of Australia.

A five hectare site of permanent mixed indigenous planting at Mark Wootton’s Jigsaw Farm in Hamilton, Victoria is dedicated to offsetting the non-transport emissions of The Climate Institute.

Climate Friendly offsets all flights, hire car and taxis used by Climate Institute staff, consultants and international guests on a calendar year basis.

All carbon credits purchased through Climate Friendly are sourced from accredited renewable energy projects.

The Climate Institute

Printed on Envirocare 100% Recycled. Manufactured under the ISO 14001 Environmental Management System.Platform + Design GLIDER

The Climate Institute Level 15/179 Elizabeth Street Sydney NSW 2000, Australia +61 2 8239 6299 info@climateinstitute.org.au

As we look forward there are challenges aplenty, as there will be for decades to come. During the election campaign the new Prime Minister Tony Abbott restated his and the Liberal Party’s acceptance of the science and the need for “strong and effective policy” to deal with it.

The Coalition Government will need to reveal more details about its policy if it is to be effective or credible in its ability to achieve the range of 2020 emission reduction targets they have, to their credit, re-committed to in Government. They should reveal those details before repealing a policy framework which, though imperfect, can achieve the outcomes we need.

As ever, The Climate Institute will bring to life well researched evidence and communication as we seek to raise awareness about the risks, opportunities and solutions of the climate challenge to policy makers, investors and the public. We’ll deepen our pioneering work in enabling individuals to be better informed, to help them build resilient communities, but also to help them take an active role with their superannuation funds as citizen investors in their retirement and in our future.

More than ever we will need your support to keep our independent and non-partisan voice speaking up strongly for our objectives and solutions. You can do so by supporting particular initiatives such as our research flagships or our climate smart superannuation project. You can also do so by one off, or even better, regular contributions including our 50 for 5 for 2050 program.

There’s much to achieve as well as much to avoid, we look forward to doing both with you in 2013/14.

Looking Ahead

John Connor CEO

www.climateinstitute.org.au