Australian government launches consultation on mandatory climate disclosures

The Australian government has started a consultation on mandatory climate-related financial disclosures for large listed companies and financial institutions, and has said it will launch a wider sustainable finance strategy early next year.

The consultation was launched at an event hosted by the Australian Sustainable Finance Institute (ASFI) and attended by the country’s treasurer, Jim Chalmers. It seeks industry input on how the proposed disclosures should be designed, but does not make detailed proposals itself.

The consultation says that the government has committed to requiring disclosures on climate governance, strategy, risk management, targets and metrics. As such, it adds, there “is scope to deliver a reporting requirement that is initially TCFD-aligned and able to reflect ISSB standards when they become available for jurisdictional adoption”.

Among the questions asked is whether the ISSB standards are the most appropriate for Australia, or whether alternative standards should be considered.

Other topics in the consultation include which entities should be in the initial phases of requirements before it is rolled out to smaller firms, as well as which additional bodies should be subject to the rules beyond listed companies and financial firms. It asks what level of assurance should be required, how emissions disclosure requirements should be designed, data gaps and other implementation issues.

The industry is also polled on three proposed approaches to oversight of climate reporting standards.

The report notes that a number of bodies, both governmental and non-governmental, are involved in financial reporting standards. It proposes either confirming the Australian Accounting Standards Board (AASB) as the entity responsible for the standards, establishing a separate sustainability standards board or merging the AASB, Financial Reporting Council, and Auditing and Assurance Standards Board (AUASB) into one entity.

The consultation says the latter two proposals could cause delays as they involve legislative processes. At the same time, it notes that the AASB and AUASB have already effectively ringfenced resources for sustainability and climate reporting, which could be effectively “spun off” if a new board is established, and that merging the three regulators would improve system resilience and reduce inefficiency beyond the climate space.

Interested parties have until 17 February to respond.

The proposals, as well as Chalmers’ commitment to produce a sustainable finance strategy and for the government to play a leading role in developing an Australian taxonomy and in sustainable finance internationally, were welcomed in a statement signed by a series of ASFI members including Allianz, Fidelity International, ANZ, Hesta and IFM Investors.

The statement calls on the sustainable finance agenda to “promote clear, coherent policy and regulation across climate, environment and social issues”, while saying that the climate-related disclosures “should promote accurate, transparent, consistent reporting of information with quality and comprehensiveness improving over time”.

The Australian Financial Review also reported that Chalmers is considering issuing green or sustainable bonds.

While a number of Australian states have accessed the market, the sovereign has yet to make a debut. However, the AFR said Chalmers is concerned that investors may find the bonds problematic as they would be repaid by a government “that draws a substantial portion of its taxation revenue from profits on fossil fuel exports”.