A new report from a government agency has called attention to the role of investors in climate action, proposing standardised climate risk disclosure, stepped up regulation and a national policy lighting the pathway to net zero emissions.
The Climate Change Authority has published its recommendations for the Australian government moving forward in its Climate Policy Toolkit for Australia report, with a focus on investment industry policies that support a transition to a net zero emissions economy by 2050.
The review has made a number of suggestions for the finance and investment segment with its authors stating current legislature such as the Superannuation Industry (Supervision) Act 1993 (SIS Act) is unclear in describing how super trustees should consider climate risk to act in the best interests of beneficiaries.
The recommendations include reviewing and putting together the data necessary to help industry and investors understand and manage climate risk, requiring the joint taskforce of the Council of Financial Regulators to ramp up their standards in the area and working with the investment sector to develop standards and verification process for green finance products and services.
The regulators in particular, it said, should develop standard reporting criteria, in line with the Taskforce on Climate-related Financial Disclosures framework. But for this to work, the government should also develop standardised national climate scenarios aligned to the Paris Agreement temperature goals, to support standardised reporting.
“Several countries around the world, including Australia’s key trading partners, have already carried out analyses of the size and performance of their low-emissions economies as part of their trade and investment strategies,” the report stated.
“However, the contribution of Australia’s low-emissions industries to the economy is currently not well understood. Investor stakeholders highlighted the need to define and classify Australia’s low-emissions economy in order to encourage global investment that is currently looking for low-emissions opportunities.
“Research that provides a comprehensive analysis of Australia’s low-emissions industry sectors, including size, performance and contribution to the overall economy, will help [investors identify] and respond to opportunities and assist policymakers to determine the barriers and pathways to growth.”
Further, the regulators are recommended to work with major accounting bodies to examine the phasing-in and mandatory reporting of climate-related risks and mainstream climate-related disclosures in companies’ audited financial statements.
The report also said regulators should provide regulatory guidance to clarify the duties of institutional investors to consider climate-related risk.
The Investor Group on Climate Change has backed the report, with chief executive Emma Herd saying investors expect the policymakers to work towards mitigating economic risks from climate change by ensuring a smooth transition to net zero emissions.
“Investors looking to mitigate their financial exposure to climate risks need a greater level of transparency than is currently being provided so they can adequately assess and price risk and opportunity,” Ms Herd said.
“Climate change remains a systemic economic risk to Australia, even as we grapple with the immediate impacts of COVID-19 and market volatility. What gets measured, gets managed. Transparent, robust reporting on material climate impacts by all companies is a key building block to navigating the zero emissions transition.
“The authority’s recommendations also recognise that investors and other financial market players need a clear signal for the pathway to net zero emissions by 2050 through a comprehensive policy suite that includes a long-term national climate strategy, declining industrial emissions caps, cleaner transport, research and development and greening the finance system.”
The report also calls for collaboration with international jurisdictions, to align classification systems for low-emissions technologies, assets and industries; as well as participation in international initiatives developing global green economy rules and standards.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].