Climate-related disclosure developments

In Australia there is no overarching legal requirement for businesses to disclose their performance on climate-related issues. Other jurisdictions such as the US, UK, Europe and New Zealand increasing mandatory climate-related disclosures, especially for listed entities or for products marketed as green or sustainable.

Australia has limited legal requirements for climate-related disclosure.  This is set to change as the Federal Government launched the “Climate-related financial disclosure: Consultation paper” on 12 December 2022 requesting feedback on a number of issues relating to mandatory climate-related disclosures.  The consultation paper indicates that changes could be implemented as early as the financial year 2024 -2025 and may take a phased approach, starting with larger listed entities and financial institutions. 

The Government’s intention is to have an international aligned framework to provide business investors with clarity on the types of disclosures and in the form of disclosures that should be made.  Already ASIC, APRA and the Clean Energy Regulator recommend use of the TCFD for voluntary climate-related disclosure.  It is no surprise the consultation paper indicates alignment with the TCFD and ISSB approaches is the way forward.

There is no uniform set of definitions or approaches to the climate-related disclosures or other elements of ESG. As part of the consultation there is a proposal to amend parts of the ASIC Act to empower the Australian Accounting Standards Board to deliver sustainability standards for use in ESG and climate-related disclosures.  The consultation canvasses the potential implementation of the draft ISSB standards in the Australian context and queries what modifications could be made to them (or what alternative standards could be adopted) and whether the AASB should determine such standards.  Another of the Federal Government’s initiatives will involve Treasury determining the most suitable finance taxonomy for Australia.

Further, the Federal Government’s strategy looks likely to include initiatives that aim to strengthen ESG labelling, reduce greenwashing and encourage more participation in international forums to support sustainable finance. 

The consultation closes on 17 February 2023.