Australia proposes mandatory climate reporting

July 5, 2023|Written by

Australia’s government plans to enforce climate-related financial disclosure regulations for companies and financial institutions. The move comes as part of the country’s efforts to address climate change and enhance sustainability.

According to the consultation paper launched by the Treasury, the proposals include disclosure of transition plans, which would require information on offsets, target setting and mitigation strategies, processes used to monitor and manage climate-related risks and opportunities, and the use of scenario analyses.

However, they do not focus on company impacts and only align as “far as practicable” with the recently published guidelines developed by the International Sustainability Standards Board.

While the reporting requirements are still under review, the paper suggests that large businesses would need to comply with the regulations as early as 2024. Smaller entities would be phased in over the subsequent three years, allowing them ample time to adapt and meet the reporting standards.

According to the Treasury’s suggestions, reporting entities would be obliged to incorporate scenario analysis into their disclosures. Initially, qualitative scenarios would be required, eventually transitioning to quantitative scenarios.

Furthermore, the proposed regulations mandate the disclosure of transition plans, although companies could fulfil this requirement by stating they do not possess such plans. The Treasury emphasised that in cases where offsets are utilised in climate plans, “disclosures would be required to include information about whether these offsets are verified through a recognised standard (such as Australian carbon credit units)”.

The proposed regulations mark a significant step towards integrating climate-related considerations into financial decision-making processes. By mandating disclosure, the government aims to ensure investors, stakeholders, and the public have access to reliable information on climate-related risks and opportunities.

However, the Australian government’s primary objective in implementing these regulations is not solely focused on double materiality.

“While the proposed requirements would not prevent companies adopting a double materiality approach as part of their disclosures, double materiality is not currently the main objective of the proposed mandatory climate disclosure requirements,” the Treasury has said.

As the consultation period begins, stakeholders and interested parties are encouraged to provide feedback on the proposed guidelines. The government has also revealed Treasury plans to develop a strategy for sustainable finance. The strategy includes climate risk disclosure with the aim of improving transparency, fostering the growth of green finance markets, as well as capitalising on emerging opportunities driven by the global surge in sustainable finance.

This page was last updated July 5, 2023

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