Climate-related financial disclosure
2 August 2023
The Law Council made a submission to Treasury’s second consultation on climate-related financial disclosure on 2 August 2023.
Consistent with its Climate Change Policy, and earlier submission on this topic, the Law Council strongly supports the development of a mandatory climate-related financial disclosure regime for Australia, drafted to reflect the IFRS S2 Climate-related Disclosures (IFRS S2) as issued by the International Sustainability Standards Board (ISSB).
The IFRS S2 requires corporations and financial services entities to disclose information about their climate-related risks and opportunities, from their first annual reporting period after 1 January 2024. This includes information relating to governance processes, strategy, risk management, and performance against climate metrics and targets – and that could reasonably be expected to affect an entity’s prospects. The IFRS S2 both reflects that the impacts of climate change are increasingly relevant to investor decisions and aims to drive climate-positive investment by facilitating market access to entities’ climate credentials.
In July 2023, Treasury released high-level proposals for how Australian climate-related disclosure standards – expected to align with the IFRS S2 but subject to development by the Australian Accounting Standards Board – might be incorporated into Australia’s existing corporations and financial services legal framework. Treasury sought feedback on the ‘workability’ of its proposals.
The Law Council’s submission emphasised the complexity of the existing legal framework, and in particular its concerns that Treasury’s consultation paper does not engage fully with the existing liability settings for corporate disclosure and how these settings would apply to climate-related disclosure. It noted that how the climate-related disclosure obligation is expressed, and in which corporate documents disclosure is required, will affect the legal consequences for defective disclosure.
The Law Council recommended that Treasury consider in greater technical detail the interaction of its proposals with the existing provisions in the Corporations Act 2001 (Cth) (and related statutes) regarding periodic reporting, continuous disclosure and fundraising disclosure documents, and those imposing civil penalties. Considerations specific to the superannuation context were also included throughout the submission.
The Law Council thanks all contributors to the submission.