ASIC chair urges companies to prepare for climate reporting
The corporate regulator will take a “pragmatic approach” to administering the new reporting standards, though putting off the preparations is “not an option”.
ASIC chair Joe Longo said the corporate regulator will take a “pragmatic approach” to administering new climate-related financial disclosure rules, but that companies should get preparing now.
Given the standards have yet to be finalised or tested in practice, Longo said ASIC will be “learning alongside” reporting entities.
From 1 January 2025, Australia’s largest listed and unlisted companies and financial institutions will be required to report on their climate-related financial performance.
Smaller, captured entities will be required to commence reporting over the following two years. The bill will require captured entities to prepare a “sustainability report” per the sustainability rules developed by the Australian Accounting Standards Board.
Longo urged entities to join the 75 per cent or so of ASX200 companies that have made commitments to or are already voluntarily reporting on climate-related matters or else to begin preparing for the mandatory standards.
“This is a crucial point: you have to do this now. It’s simply not an option to put this off until after legislation has passed, and then scramble to comply. You have to figure out how you’re going to marshal data, support and capabilities, and start keeping the necessary records now – today,” he said.
“More than 6,000 entities will be required to report under new climate-related disclosure requirements in the next few years. They need to start preparing for the future, now.”
Longo said entities should be developing the organisational and governance structures needed to support the new disclosures.
While reporting will not be free, Longo said there will be benefits to be gained from strong sustainability reporting.
“More reporting requirements mean you benefit from greater visibility of the physical and transitional risks. You can also benefit from climate-related opportunities of other entities in your value chain and more visibility on these issues across the entire economy,” he said.
“This will support companies to manage their own climate-related risk and opportunities over the short, medium and long term, in the best financial interests of the entity and its shareholders.”
The reporting standards, he said, will help companies to meet the Australian government’s net zero by 2050 goal, and its more immediate emissions reduction targets.
ASIC will develop regulatory guidance on the disclosure requirements that will be published on its website and as a standalone regulatory guide.
More detailed guidance will likely come once ASIC has had time to observe market practice and other regulatory developments, he said.
The regulator will continue to review sustainability disclosures under its annual financial reporting surveillance program while also carrying out proactive surveillance.
He added that ASIC supports alignment of the Australian standards with the international standards “as much as possible” in order to guarantee market efficiency and to reduce the regulatory burden for reporting entities.
As the agency responsible for administering the mandatory reporting regime, Longo said the corporate regulator will “understand that there will obviously be a period of transition”.
Treasury has proposed a phased rollout of the disclosure and assurance requirements, and has introduced modified liability settings which will limit private suits against protected statements for three years.
Beyond assisting reporting entities to meet the new demands, Longo said ASIC will work alongside the government and other agencies on supporting the implementation of the standards, including broader initiatives such as the potential data challenges.
“As I’ve said before, the growing interest in environmental, social, and governance (ESG) issues is driving the biggest changes to financial reporting and disclosure standards in a generation,” said Longo.
“This is a transformational issue for global markets, and we need to be ready to meet that change at every step of its development. To do that, we must maintain high standards of governance and disclosure.”
