The Investor Group on Climate Change (IGCC) has called for additional climate reporting guidance specifically for institutional investors.
Namely, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, which sets out the framework for Australia’s first climate-related financial disclosure regime, passed Parliament on 9 September.
Starting 1 January 2025, this legislation will impose mandatory climate reporting requirements on Australia’s biggest listed and unlisted companies and financial institutions, with other large businesses to be phased in over time. It is expected to apply to over 6,000 entities once fully implemented.
Highlighting that its supervision and enforcement of this new regime will be “pragmatic and proportionate”, the Australian Securities and Investments Commission (ASIC) has promised it will engage closely with industry, releasing a draft regulatory guide on the sustainability reporting regime for consultation with stakeholders in November.
However, the IGCC notes that ASIC’s proposed guidance covers “forward-looking information”.
“When it comes to climate reporting, there is a wide range of forward-looking information that must be published such as future climate risks and opportunities, targets, strategies and plans,” the industry body explained, adding that forward-looking statements must be based on “reasonable grounds”.
In the case of institutional investors, the IGCC believes that added guidance is needed due to the day-to-day businesses of investors differing from that of companies trading goods and services.
“Investors must deal with relatively high degrees of uncertainty as the climate risks and opportunities they manage come from the individual assets in their portfolio.”
Set out in its submission, the investor group recommends that the regulator “expressly acknowledge” that forward-looking statements from institutional investors “inherently involve a high degree of uncertainty”.
As such, the IGCC has pressed for further guidance, coupled with illustrative examples of ASIC’s expectations as to how investors should substantiate “reasonable grounds” for such statements consistent with ASIC’s approach to enforcement.
It added that examples of good practice forward-looking disclosures will help investors more confidently publish information about potential climate risks and opportunities, targets and plans.
“A well-planned, fair and fast transition to a net zero economy is in the interests of institutional investors as custodians of the retirement savings of everyday Australians.”
