Better climate related financial disclosures is an issue that Ethical Partners has long been advocating for, both directly with ASX listed companies, through our ASX wide Standards Reporting, and our previous policy and advocacy work, including direct consultations on mandatory climate related financial disclosures with APRA, ASIC, Treasury and Cabinet, the AASB, the ASX and the media over the past few years.
We also used this most recent individual submission to underline our strong internal agreement with the collaborative submissions that we, as active members of the IGCC Policy and Advocacy working groups, and the PRI’s Global Policy Reference Group supported, that if implemented effectively, mandatory, and standardised disclosure of climate change related risk, opportunities and impacts will improve market transparency, assist both companies and investors to navigate the transition and help facilitate two-way global investment flows for Australia.
Other important recommendations we made in our submission to what we believe was a crucial consultation included:
o The phasing in of these disclosure standards as soon as possible, beginning with the 2024/2025 financial year.
o Alignment wherever possible with the emerging ISSB requirements and the TCFD and TNFD frameworks, in order to allow global comparability and interoperability.
o These requirements cover, at a minimum, the S&P/ASX 300. We believe these companies should already be aware of the need for climate related risk and opportunity analysis and disclosure and be already working internally on this disclosure, and we furthermore believe that mandatory, credible disclosure from these companies is critical for the risk and opportunity analysis of investors.
o Reporting should be subject to third part verification and assurance requirements. Australian Government consider amendments to the Corporations Act 2001 (Cth) that would support the enforcement of these required disclosures. We would furthermore suggest that the Australian Government work closely with the ASX, APRA and ASIC regarding the enforcement of these mandatory reporting requirements within companies listing requirements and compliance with other relevant corporate governance regulations.
o inclusion of Scope 1,2, and 3 emissions as crucial. The significant inputs and assumptions, the calculation methodology and the organisational scope are also crucial inclusions for investors.
o Scope 3 constitutes the largest and most impactful emissions for many ASX listed industry segments and companies and therefore, we believe that the inclusion of these emissions is essential for the credibility and the impact of this disclosures regime.
o The proposed climate related financial disclosure reporting requirements be designed with the intention and ability in mind to extend these mandatory disclosures to include other key sustainability issues, particularly natural capital, and biodiversity, as well as human rights and social concerns, as able, in the future. A particular benefit of the emerging TNFD framework is its ability to build on and leverage of the acceptance of, and investor and company experience with the TCFD, and we would suggest that the ability to leverage off this initial proposed climate related financial disclosures could be a key benefit for the acceptance of and adoption of further mandatory sustainability related disclosures that are crucial for Australian investors in the future.
o The development of a common, publicly accessible platform allowing access to these disclosures by financial market participants is key.
Ethical Partners are pleased to see Australia take the next steps to implement mandatory climate reporting with the release of draft climate standards, which we provided feedback on.
Ethical Partners have continuously called for the provision of high quality, comparable data on company’s climate governance and carbon metrics, which we believe is imperative for investors to fulfil the potential of responsible investment.
Ethical Partners have been proud to have been active supporters of the TNFD Forum over the past few years, and to provide regular feedback on the development of the official TNFD recommendations, which were launched in December, as well as to be active members of the RIAA Natural Capital Working Group.