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Emma Herd, CEO of the Investor Group on Climate Change (IGCC) has said that Australia must learn from regulators in New Zealand and Canada who have shunned voluntary guidance on climate disclosure in favour of mandatory regimes.
Herd’s comments come on the back of a new report, ‘Full Disclosure: Improving Corporate Reporting on Climate Risk’, from IGCC – an Australian-New Zealand investor coalition whose members manage more than $2trn and include major asset owners like AustralianSuper, First State Super and QBE Insurance Group. The paper has been written with climate risk consultancy firm Energetics, and pools the views of 50 investors from 22 organisations about the current status of corporate climate disclosure.
Herd said there was a strong view that a consistent approach to climate risk and scenario analysis was not going to develop voluntarily. “Around the world different jurisdictions are working out how to ensure consistent, clear and investable climate risk disclosure that translates to action in capital markets. Some markets are using voluntary guidance developed by regulators. Others, like New Zealand and Canada, are moving to mandatory disclosure regimes, something which should now be considered in Australia.”
Reflecting the recommendations of the Taskforce on Climate-related Financial Disclosures and engagement initiative Climate Action 100+, the investors surveyed stressed that the next generation of corporate disclosure must address the need for senior-level climate expertise, links between climate performance and executive pay, and company strategy. Emissions reporting should cover Scope 3, and physical climate risks should be considered alongside transition-related ones.
Companies should also begin to provide auditing and assurance for their results, says the report.
One participant, Stuart Palmer, Head of Ethics Research at Australian Ethical said “investors want companies to show not just that climate risk is being assessed, but how this is informing and changing their strategies and decision-making from board governance to capital expenditure to future business opportunities.”