Minister’s climate reporting bill powers unfettered, unconstitutional: experts
A range of witnesses to a parliamentary hearing have raised concerns over the minister’s powers to create new reporting requirements for matters beyond sustainability.
Several witnesses to a parliamentary hearing on the government’s proposed climate reporting bill have taken aim at the minister’s broad powers to alter the reporting requirements.
The bill grants the minister the power to compel disclosure of financial matters beyond climate-related matters.
While any legislative instruments made under that power would be subject to disallowance and sunset after 10 years, Herbert Smith Freehills said the regime could be “broadened significantly without due consultative processes or fulsome legislative oversight.”
The Australian Institute of Company Directors (AICD) said the power was inappropriate, adding that an extension of the reporting requirements beyond climate would “require significant public consultation, and the usual parliamentary scrutiny.”
“The desire for mandatory disclosure requirements to be able to be expanded ‘quickly in response to the severity of risks facing the financial market regarding sustainability disclosures’ [as stated in the bill’s explanatory memorandum] does not justify circumventing the well-established process for substantive policy matters to be debated and ultimately legislated,” it said.
The AICD quoted the Australian Law Reform Commission in stating that “unconstrained or open-ended delegations that effectively enable delegates to determine matters of significant policy risk undermining the law’s predictability and the federal separation of powers.”
Baker McKenzie similarly submitted that the minister's powers were “unacceptably broad.”
“The current Bill is the culmination of a lengthy consultation process, attesting to the fact that climate-related disclosure raises significant and complex policy issues,” said the firm.
“It follows that any proposal to expand the suite of disclosures should be subject to a comparable process of policy formulation, public consultation and legislative scrutiny, and is not an appropriate subject of delegated Ministerial power.”
The Senate also heard evidence of the potential unintended consequences of the bill for smaller businesses and not-for-profits.
The AICD said the compliance burden for Group 3 entities – generally, those with consolidated revenues of above $50 million and below $200 million – was “not commensurate with their climate impact or the expected benefit for climate reporting for their users.”
Treasury estimated that only 5 per cent of the approximately 5,000 Group 3 entities pose material climate risks or opportunities and yet all would be required to conduct an audit to prove this.
In a statement released on Tuesday, CA ANZ referred to these impacts as “a significant miscalculation.”
“What’s the point of subjecting Group 3 firms to such costs when the government has already indicated it expects that 95 per cent of them will have no material risks or opportunities?” asked Amir Ghandar, CA ANZ reporting and assurance leader.
Several witnesses, including the Governance Institute of Australia, the AICD, CA ANZ, and CPA Australia, recommended lifting the minimum threshold of Group 3 entities from $50 million in aggregated revenues to $100 million.
The AICD also recommended exempting not-for-profits (NFPs) from the reporting standards, to match the proposed exemption applied to charities.
“We are unaware of a clear policy rationale having been offered for why NFPs are not afforded the same exemption as that offered to charities,” said the AICD.
“In our experience, NFPs have, to date, had limited engagement with climate reporting, and compliance with the proposed regime will require significant upskilling and external support. This will create significant compliance costs that are difficult to justify given the focus of the reporting regime should be on the largest entities with the largest carbon footprints.”
