The Treasurer has followed up the release last month of a draft bill giving the Australian Accounting Standards Board power to set climate-related and other sustainability standards for financial reporting, with a consultation paper on the design and implementation of standardised, internationally-aligned climate disclosure requirements.
Treasury’s position is that governments and regulators around the world have “heightened their focus” on the quality and standardisation of disclosures.
“These developments create a potential guidance gap for Australia, as market expectations for certainty may not be met without government action and without efforts by business to continue to improve the quality of disclosures,” the consultation paper says.
“The government has committed to ensuring large businesses provide Australians and investors with greater transparency and accountability when it comes to their climate-related plans, financial risks and opportunities.”
Last month it released a draft bill, Treasury Laws Amendment (Measures for Consultation) Bill 2022: Sustainability Standards, which amends the ASIC Act to give the AASB power to align Australia’s reporting standards with global development in sustainability reporting.
The draft bill makes clear that the government’s intention is that the work of the AASB will be aligned with the standards being set by the International Sustainability Standards Board. Last year, the International Financial Reporting Standards Foundation established the ISSB, giving it the task of developing global standards for sustainability disclosures.
The ISSB, in turn, is building on the work of the Task Force on Climate-Related Financial Disclosures.
The consultation paper says businesses that will be covered include large, listed companies and financial institutions.
Treasury is seeking views on whether large, unlisted entities and statutory bodies should be included.
The paper includes questions about the appropriate timing for the introduction of new standards, the costs and benefits of aligning with international standards, and the degree to which the AASB should be allowed to modify international standards to accommodate Australian law or in consideration of “the Australian institutional environment”.
Treasurer also wants to know what stakeholders think reporting requirements should be: whether climate disclosures should be included on regular financial reports and operational reviews, or as a separate report.
It wants feedback on how extensive reporting should be: whether it should include coverage of governance, strategy, risk management and targeting.
And it wants to know what level of assurance should be required for climate disclosures and who should provide the assurance.
Treasurer Jim Chalmers also announced yesterday that the government has instructed Treasury to develop a sustainable finance strategy, covering measures to deepen green finance markets and take advantage of opportunities presented by the growth in global demand for sustainable finance.
Chalmers said Treasury will work with the Council of Financial Regulators on the projects.