While following the lead of New Zealand and the UK in establishing mandatory reporting, Australia is proposing to align with the ISSB, rather than the TCFD.
Australia is set to become the latest country to introduce mandatory corporate climate risk reporting with the Treasury issuing a consultation on its proposals.
The government is taking a phased approach to introducing the new rules, which would start in 2024 for large listed businesses. It is also proposing that they should apply to large financial institutions.
New Zealand, Japan and the UK have already made climate-related disclosures mandatory for some categories of businesses, while the US, Switzerland and Singapore are also developing compulsory climate disclosure requirements.
However, unlike countries such as New Zealand and the UK – which are aligned with the Task Force on Climate-related Financial Disclosures – Australia suggests aligning its requirements with the International Sustainability Standards Board.
The paper says while TCFD recommendations have seen strong uptake in Australia, they leave significant scope for disclosures to vary in reporting across entities. In contrast, the ISSB aims to fill this gap by providing the necessary standardisation and comparability between climate disclosures.
In 2021, Australia had the fourth largest number of TCFD-supporting organisations by jurisdiction.
The consultation also asks if climate disclosures should have third-party assurance and who should oversee it. It asks whether this should be the existing Australian Accounting Standards Board, or if a separate body should be created to focus on sustainability.
Simon O’Connor, CEO of the Responsible Investment Association Australasia, said: “Responsible investors will welcome the government’s national sustainable finance agenda, which will finally bring Australia in line with other countries – such as the UK – by supporting the finance sector to contribute to the nation’s prosperity. While this is a great step forward, it’s just the start.”
O’Connor said the climate disclosure needed to be clear and robust to help investors distinguish the corporates that had real commitments and outcomes. He added that there should be scope to grow the reporting regime to broader sustainability performance, such as upholding the rights of First Nations peoples, and protecting and restoring biodiversity.
“Overall, the [Treasury’s] announcement is recognition that investors will play a key role in setting the agenda for change across corporate Australia – and a move that the RIAA has been championing for years,” he added.
The deadline for responses to the consultation is February 17 2023.
Photo credit: Bloomberg