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.
In a keynote speech at the Deakin Law School International Sustainability Reporting Forum on 22 April 2024, ASIC Chair Joe Longo addressed the imminent changes in financial reporting and disclosure standards, particularly focusing on the mandatory climate disclosure regime. This article provides a breakdown of his key points.
The context of transformation
Longo began by acknowledging the transformative nature of the growing interest in Environmental, Social, and Governance (ESG) issues, which is driving significant changes in financial reporting standards. He emphasised the need to maintain high standards of governance and disclosure to meet these changes effectively.
Addressing concerns
He acknowledged the concerns surrounding the complexity of reporting requirements under the new regime. According to the recent Australian Institute of Company Directors (AICD) director sentiment index survey, 31% of respondents cited complexity as their main concern. Longo noted that while climate change is not a top concern for everyone, it’s essential to address the challenges associated with reporting obligations.
Regulatory transition
Longo discussed the progress toward implementing the mandatory climate-related disclosure, highlighting the recent introduction of legislation proposing mandatory climate-related disclosure into Parliament, and the consultation on Australian Sustainability Reporting Standards (ASRS). He stressed the importance of aligning Australian standards with international ones to improve market efficiency and reduce regulatory burden.
Urgency of preparation
Longo emphasised the need for entities to prepare for the new obligations immediately. He highlighted that waiting until after the legislation passes to comply is not an option. Entities must start gathering data, support, and capabilities now to meet the upcoming requirements.
Support during transition
While acknowledging the complexity of the transition, Longo assured that ASIC would take a pragmatic approach to supervision and enforcement. He highlighted Treasury’s phased approach to implementation and emphasised ASIC’s role in providing guidance and support to help entities meet their obligations.
Compliance equals good business
Longo underscored that while there will be costs associated with reporting, there are also significant benefits. Increased transparency around climate-related risks and opportunities can support companies in managing their financial interests effectively, aligning with government commitments and global agreements.
ASIC’s expectations
Longo outlined ASIC’s plans to develop and issue regulatory guidance on climate-related financial disclosures. This includes a new regulatory guide and resources on ASIC’s website dedicated to climate-related financial disclosures. He emphasised that ASIC will monitor progress and market practice and adjust guidance accordingly.
Start today
He urged entities to start preparing now, emphasising that reporting under the Taskforce on Climate-related Financial Disclosures (TCFD) framework could position them well for future mandatory reporting. Longo encouraged companies to engage with the International Sustainability Standards Board (ISSB) standards to test capabilities and readiness.
Conclusion
In conclusion, Longo reiterated the importance of preparation, emphasising that compliant businesses are more likely to succeed. He assured that ASIC would provide further guidance as the regulatory landscape evolves but stressed the need for entities to start preparing for the future now.
