Financial firms urged to prepare for mandatory climate disclosure regime
Financial firms urged to prepare for mandatory climate disclosure regime | Insurance Business Australia
Environmental
Financial firms urged to prepare for mandatory climate disclosure regime
Urgency and compliance emphasised
Environmental
By
Roxanne Libatique
Joe Longo, the chair of the Australian Securities and Investments Commission (ASIC), has emphasised the need for Australian firms to gear up for the incoming mandatory climate disclosure rules.
Speaking at the Deakin Law School International Sustainability Reporting Forum, Longo highlighted the global shift towards mandatory climate disclosure requirements and called on Australian entities to establish the necessary frameworks to comply with new regulations.
He offered assurances that ASIC would guide entities through the transition by issuing practical guidance to navigate the new regulatory landscape. Additionally, ASIC plans to work in conjunction with the Australian government and other regulatory bodies to facilitate the implementation of these rules, ensuring support is available for entities to meet their new obligations.
Australia’s mandatory climate disclosure regime
Longo revealed that over 6,000 entities would soon need to adhere to these new climate-related disclosure rules, urging immediate action to prepare for the changes.
He described the move as being part of a broader global shift towards integrating environmental, social, and governance (ESG) considerations into financial reporting, marking a significant transformation in disclosure standards worldwide.
In his address, Longo acknowledged the complexities of the new reporting standards, citing a survey by the Australian Institute of Company Directors (AICD) which showed that 31% of respondents are concerned about the complexity of the new requirements. Despite the challenges, the urgency to comply remains high.
ASIC is advocating for the alignment of Australian standards with international benchmarks to facilitate consistency and reduce the regulatory burden on Australian firms. This alignment aims to enhance the efficiency of Australian markets and improve the competitiveness of local companies.
With the legislation now moving forward, Longo pressed the importance of readiness, noting that a significant number of large Australian companies are already voluntarily reporting against the TCFD framework. He stressed the necessity for all firms, regardless of size, to start planning and implementing the required changes without delay.
“While companies may continue to use the voluntary TCFD framework, it may also be useful for them to begin engaging with the ISSB standards through the report preparation process to test and/or assess capabilities, data availability, and requirements against the new standard. This will help inform the company of future requirements,” he said.
Mandatory climate disclosure regime transition
As the regulatory framework continues to take shape, ASIC acknowledged that there will be a period of adjustment. The regulator supports a phased implementation approach, allowing entities sufficient time to enhance their reporting processes and capabilities.
The regulator also continues to recommend that listed companies voluntarily follow the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures recommendations.
Longo encouraged firms to begin developing robust organisational and governance structures now, to not only comply with the upcoming requirements but also to prepare for potential future mandates on other sustainability-related topics.
“While it’s too early to talk about enforcement strategy, that should not be taken to mean it’s too early to be prepared. This means considering and putting into place the systems, processes, and governance practices that will be required to meet new climate reporting requirements. It means ensuring you adopt the necessary practices to avoid greenwashing,” he said. “Doing this now will allow the best transition – and it will provide a surer foundation for a more profitable business – because a compliant business is a profitable business.”
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