Climate reporting rules will drive investment: Business Council
BCA CEO Bran Black was “pleased” to see the government had incorporated the Council’s recommendations, adding the standards will bring greater investor certainty.
Proposed climate financial reporting standards will help Australian businesses attract and retain capital by delivering stronger investor certainty, the Business Council of Australia (BCA) said.
BCA chief executive Bran Black said he was “pleased” to see the government had acted on the council’s recommendations following the initial draft of the legislation.
The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) was introduced to Parliament on 27 March.
“Climate-related financial disclosures will be imperative to allowing more informed decisions on future investments, including attracting and retaining capital in Australia,” said Black.
“Investors and shareholders need certainty and visibility that companies are managing their climate risks in line with international standards.”
A spokesperson for the BCA told Accounting Times the Council had been particularly pleased the government had acted on its recommendation that the legislation should be brought more into line with international standards.
In its submission, BCA wrote that “close alignment” of the Australian standards with those of the International Sustainability Standards Board is “critical”.
Conformity would empower users to make “valid comparisons across different corporations in different jurisdictions” and would minimise compliance costs.
BCA also embraced the decision to delay the commencement date for reporting to financial years beginning on or after 1 January 2025.
Doing so will “give time to some of the nation’s largest companies to adjust to the climate reporting standards,” it said.
“It is the BCA’s strong contention that the primary purpose of these new requirements should be to help investors form the most rigorous view possible of climate risks and opportunities as they pertain to investments in corporations,” it submitted.
This position was shared by the Australian Council of Superannuation Investors (ACSI) which said the standards will give its members “clearer information about their investee companies’ exposure to physical and transitional risks related to climate change.”
In 2023, ACSI found that 70 per cent of ASX200 companies were already voluntarily reporting under the international reporting standards in 2023, suggesting the transition will – at least among larger companies – be relatively smooth.
“Mandatory climate reporting will give investors access to consistent, comparable, and decision-ready information, as well as allowing them to see how climate risk is being managed across the economy,” said Louise Davidson, CEO at ACSI.
KPMG Australia also embraced the government’s amendments to the initial draft exposure in its recent reporting update on the legislation.
“We support the bill’s proposal of phased adoption of mandatory climate-related financial disclosures and are pleased to see the clarifications made as a result of comments raised on the draft legislation in January,” said Adrian King, KPMG partner, ESG advisory and assurance.
According to KPMG, the Bill will be debated in parliament at the very earliest in the May 2024 sitting.
Ahead of the bill’s passage, the firm recommended that businesses should perform a gap analysis and create a roadmap to target any capacity restraints.
Among the first affected entities will be those with gross assets of $1 billion, revenues of $500 million, and 500 or more employees. These large entities will be required to commence reporting for the financial year beginning 1 July 2025.
Entities with gross assets of $500 million, revenues of $200 million, and 250 employees or more must report from 1 July 2026.
On Thursday, the government released its “pilot guide” to the disclosure rules that showcased how a limited range of criteria will affect the FY2023–24 annual reports of the various state departments.
Government departments will be required to apply the full range of reporting requirements to their FY2024–25 annual reports and beyond.
