An alliance of 15 Australian organisations representing business, finance, shareholders, and retail and institutional investors, has called for passage of the government’s mandatory disclosures bill “without undue delay”.
According to the alliance, implementation of a climate reporting framework that incentivises high quality, useful and internationally aligned climate-related disclosures is “essential” to maintain Australia’s place in the global economy.
Together, the alliance represents over 900 companies and $80 trillion in assets under management, and includes the Australian Council of Superannuation Investors (ACSI), Financial Services Council (FSC), Responsible Investment Association Australasia (RIAA), and the Australian Institute of Company Directors (AICD).
Last month, Treasurer Jim Chalmers announced Australia’s largest companies will be subject to a series of new climate reporting standards come 2025, with the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Climate reporting Bill) being introduced to Parliament following three public consultations in 2023 that gathered over 250 submissions in total.
The new mandatory climate reporting requirements would apply to Australia’s biggest listed and unlisted companies and financial institutions from 1 January 2025, with other large businesses to be phased in over time.
“This legislation will introduce standardised, internationally aligned reporting requirements for businesses, to ensure they are making high quality, climate‑related financial disclosures,” Chalmers explained.
He remarked these changes will establish Australia’s climate risk disclosure framework, giving investors and companies additional clarity when investing in new opportunities as part of the net zero transformation.
“A rigorous, internationally aligned and credible climate disclosure regime will support Australia’s reputation as an attractive destination for international capital and incentivise investment in the energy transformation,” Chalmers said.
To support a smooth transition to the climate disclosure regime, the bill also outlined limited relief from private litigation for a three-year transitional period, though the corporate regulator could take action for breaches of the reporting requirements during this period.
The alliance said it believes the bill strikes a “sensible and pragmatic balance”, including the inclusion of a transitional relief period, and it urged for the bill to be passed in a timely manner.
It supports the alignment of climate-related disclosures in Australia to the international standards set by the International Sustainability Standards Board (ISSB), stating this would provide more clarity and certainty to the finance and business sector regarding the timing and requirements of disclosures, which, in turn, enables appropriate investment in resources and capacity building.
However, the group acknowledged this move would not be easy, marking a “once-in-a-generation change to corporate reporting” which would require significant upskilling and investment.
“It will also take time, as organisations mature their disclosure practices. We also recognise the need to manage the impact on smaller entities by carefully calibrating requirements,” it said.
“The group look forward to working with the Australian government, national standard setters, and each other to support the implementation of this regime.”
Assessing Australia’s preparedness
Earlier this year, an assessment of over 100 Australian financial services firms’ climate disclosures by global consulting firm Baringa raised questions about the sector’s preparedness to meet imminent regulatory obligations.
Its Beyond Box-Ticking report, assessing the disclosures of a number of Australian financial firms, including 20 banks, 19 asset managers, and 18 superannuation funds, found widespread disclosure among Australia’s largest financial services firms, particularly Australia’s biggest banks, all of which sit within the ASX 20. However, the breadth of disclosure significantly dropped off outside the ASX 100.
Additionally, only a handful of insurers and super funds in Australia are disclosing detailed transition plans, it said, while limitations regarding target setting guidance, a lack of high-quality scenario analysis, and poor integration of climate into strategic planning makes linking climate risks to financial impact more challenging.
According to the analysis, while firms are expanding their climate reporting to meet evolving demands from regulators, banks, and investors, they are “significantly underprepared” to credibly disclose against future requirements.
“The analysis found just two companies are meeting all disclosure requirements – that is, they are addressing every line item in international sustainability disclosure standards. However, analysis of their capability found significant gaps in the depth and quality of those disclosures,” Baringa elaborated.
“This lack of depth and quality should not be seen as a failure; rather as a demonstration of the highly technical nature of climate analysis and integration, and room for further improvement in the integration of climate change risk and strategy throughout business’ operations, strategy, risk, and financial reporting.”
