The next wave of financial reports in the coming weeks and months is expected to bring both publicly-listed and private organisations’ climate risk disclosure under renewed scrutiny, and with it the Australian directors and management teams behind them. 12 months since the recommendations of the Task-force on Climate-related Financial Disclosures (TCFD) were launched, regulators and investors have made their expectations clear.
Despite the disclosure being voluntary in Australia so far, there is a compelling case developing that corporate entities will have to address associated risks proactively. APRA resolved at the end of 2017 to “ask questions” of regulated entities, and for the first time last month the ASX Corporate Governance Council included climate-related risks in the proposed update of its Corporate Governance Principles and Recommendations. The guidance is due to enter into force in mid-2019, however directors and the subject matter managers advising them are well advised to start the lengthy process ahead of time.
The guidelines of the Australian Council of Superannuation Investors (ACSI) have included expectations about climate risk disclosure since late 2017, and investors have resorted to actions ranging from direct engagement with companies, to resolutions at annual general meetings, to announcements of targeted divestment. The ACSI guidelines are well aligned with international investors such as heavyweights Vanguard and Blackrock in urging companies to disclose how the transition to a low carbon economy could affect their business and asset valuations, reflecting how the matter has become a priority for the investment industry. A timeline of related events is detailed below.
This time last year saw the discussion taking up speed and it is fair to assume that one year in, the bar is higher for annual reports for FY2017/18. If your company is at the beginning of the process, you should get your Board up to speed and behind the process, undertake an assessment of your stakeholders’ expectations, and review your risk management systems. You will need to be able to demonstrate to stakeholders that your company is taking the matter as seriously as they do and that you are working towards implementation. Otherwise you will find yourself being asked some uncomfortable questions after the release of your next report.
Matt is the Managing Director and provides strategic carbon emissions and energy advice for some of Australia’s largest and most well-respected corporations.