Please ensure Javascript is enabled for purposes of website accessibility
Law Council of Australia

Resources

Climate-related financial disclosure: exposure draft legislation

This submission concerns the Treasury Laws Amendment Bill 2024: Climate-related financial disclosure (the Exposure Draft).1 It builds on the Law Council’s earlier submissions to Treasury’s consultation process, dated 2 March and 2 August 2023.2 These earlier submissions identified overarching issues with the Australian Government’s reform process, its development of its base proposals, and timeframes.

The Law Council supports the introduction of mandatory climate-related financial disclosure (CRFD) laws in Australia, drafted to align with the IFRS S2.3

The Law Council’s Climate Change Policy, adopted in 2021,4 endorses rapid and widespread action on the part of governments, regulators, and the private sector, to combat the effects of human-induced climate change. The Policy emphasises that climate action, including the development and implementation of robust mitigation and adaptation measures, must be based on the rule of law and principles of a just transition. It recognises the important role that lawyers have in advising different industries, actors, and clients, on the legal implications of climate-related risks and opportunities, and transition to a zero-carbon economy.

CRFD laws must be carefully calibrated to Australia’s domestic context to be effective and worthwhile. Pragmatism is needed, considering:

  1. the complexity of Australia’s existing legal framework for corporate disclosure;
  2. the likely impact of the laws (including penalties) on the behaviour of captured entities;
  3. the maturity of the systems and processes needed to produce and verify reliable CRFD, including in audit and assurance; and
  4. the need to achieve disclosure that is accurate, concise, and consistent with international standards. This will ensure that investors and other users can easily navigate the information made available and that captured entities can comply without undue cost or complexity.

This submission identifies three key issues that, in the Law Council’s view, require further consideration. They concern:

  1. The scope of the CRFD regime, and in particular its application to Group 3 entities. The Law Council is concerned that the CRFD regime may capture more entities than the Treasury modelling, described in the Policy Impact Analysis (PIA),5 shows. If the population of Group 3 entities is larger than intended, Treasury may wish to lift the thresholds to match other reporting regimes: for example, the Payment Times Reporting Scheme and Modern Slavery Reporting.
  2. The form of the directors’ declaration. The Law Council considers that, until the systems and processes needed to produce and verify reliable CRFD mature to the point where the production of an audit report is possible (currently expected in the financial year beginning on or after 1 July 2030), a modified form of directors’ declaration should be adopted.
  3. The limited immunity. In order to encourage high-quality CRFD in the early years, the Law Council considers that the limited immunity should be expanded: to cover all forward-looking statements; to apply to each captured entity’s first three sustainability reports; to cover statements made in other corporate documents that are derived from the sustainability report; to strict liability criminal offences; and to limit the civil remedies available to the Australian Securities and Investments Commission (ASIC) to declarations and injunctions.

Read the full submission below.


1 Australian Government, Treasury, Climate-related financial disclosure: exposure draft legislation (online, 12 January 2024) (Exposure Draft).
2 Law Council of Australia, Submission to Treasury, Climate-Related Financial Disclosure (online, 2 March 2023); Climate-Related Financial Disclosure: Second Consultation (online, 2 August 2023).
3 International Financial Reporting Standards (IFRS) S2 Climate-related disclosures (IFRS S2) as issued by the International Sustainability Standards Board (ISSB) (online, 2023).
4 Law Council of Australia, Climate Change Policy (online, 27 November 2021).
5 Australian Government, Treasury, Policy Impact Analysis: Climate-related financial disclosures (online, September 2023) (PIA).

Share

Related Documents
Tags

Most recent items


Trending Items