Context
ACSI supports mandatory climate reporting and uses the disclosures. Climate-change risks are financially material, embedded across the economy and represent a substantial challenge for Australian companies and investors, including superannuation funds. Mandatory disclosures that provide effective, comparable, and consistent information aligned to global standards are a valuable tool to understand risk exposure and opportunities. Investors rely on climate disclosures and expect meaningful, decision-useful information.
Information disclosed under the reporting regime is used by investors in investment analysis, risk assessment, stewardship activities and investment due diligence. The reporting requirements underpin the overarching policy goal of supporting economy-wide decarbonisation and meeting Australia's own 2035 target as well as the goals of the Paris Agreement.
The reporting framework is one policy lever among the combination of legislation and regulation needed to support and encourage decarbonisation, which would result in better economic outcomes for Australia. The physical impacts of climate change, alongside their human and economic costs, are already being witnessed around the world. These costs will only grow without effective climate policy. Investors need quality decision-useful information to support their understanding of the risks and opportunities, particularly given the magnitude of the risks.
ACSI's recommendations
Overview
ACSI supports Treasury's core objective of maintaining the "quality, consistency and comparability of climate-related financial disclosures of reporting entities". As the Consultation Paper notes, the first year of climate-related financial disclosures provides an opportunity to assess whether all elements of the framework are fit for purpose, and whether adjustments may enhance the efficiency of reporting.
It is also an opportunity to identify areas for Treasury's review of the framework in 2028-29. Disclosures and information availability is expected to improve over time as reporting entities build capabilities. We support Government's consideration of which tools would support this capability building and improving efficiency.
Our responses to the detailed consultation questions focus on improving guidance and supply chain value requests as mechanisms for improving efficiency.
Further reporting support - guidance
ACSI strongly supports developing further guidance to assist reporters. Guidance would significantly boost efficiency by providing context and interpretation around the principles-based reporting requirements, including in particular the materiality and proportionality provisions. We also encourage authoritative sector-specific guidance, which, by recognising and reflecting the different types of entities with disclosure obligations, would support reporting efficiency and comparability. This would, ultimately, provide confidence to the market. Finally, with considerable time and energy spent on interpreting reporting concepts, better guidance would support both efficiency and clarity. Guidance can also support audit efficiency.
Guidance can play an important role in achieving all four review principles, assisting reporting entities to reduce compliance costs and maintain alignment with international reporting requirements. We are aware of industry efforts to develop reporting guidance which could provide a solid and efficient starting point. Nonetheless, guidance from a standard setter, regulator or policy maker has significant influence and would better promote confidence and efficiency. We recommend appropriately resourcing the relevant regulators or standard setters to develop guidance materials, in conjunction with experts and industry sector bodies to develop useable guidance which adds value for reporting entities, users, and assurance providers.
Please click on the resources link to the right for detailed response to the consultation questions.
