Reporting comparison

Bringing climate reporting into line with financial reporting – in particular in the areas of quantifiability and rigour – is a key goal for markets and major companies. In Australia, it is largely up to market participants themselves to do the heavy lifting.

DAVISON How are requirements on reporting changing in Australia, given there is no sign of a move toward mandatory TCFD [Taskforce for Climate-related Financial Disclosures] reporting?

TRIGONA NBN Co released its first sustainability report earlier this year. The report looks at the UN Sustainable Development Goals (SDGs). The sustainability team selected seven key principles it believes are most aligned with our organisation, including a healthy and engaged workforce, improving gender diversity and climate action.

Climate-related risks are obviously key within NBN. With millions of Australians relying on the National Broadband Network, it is critical we operate a reliable and resilient network – and climate is clearly a major risk we have to manage. We have already had many crises in Australia in the last few years with bushfires, floods and, obviously, COVID-19.

We are mindful of our ability to report on and manage all these climate-related risks. We have taken steps to manage climate risk through business processes and programmes in accordance with the recommendations of the TCFD. We have also strengthened the company’s sustainability programme across governance, risk management, strategy and metrics, and targets.

CASTILLO It is a very similar approach for us – as a group we are supportive of the SDGs. We have made a concerted effort to ensure we continue to be at the forefront of what is occurring with developments like the EU taxonomy and TCFD. We are making gradual but very positive steps toward reaching a level of maturity in how we approach our whole sustainability strategy.

We believe it is important to have aspirational targets. But, most importantly, it is about having authenticity to substantiate tangible and measurable objectives. This is where we have made a significant effort to ensure we have meaningful, realistic targets and that we can substantiate these in an efficient manner, while adhering as much as possible to what we believe are the gold standards being implemented across various regions. We aspire to adherence with the TCFD framework for our disclosure.

DAVISON Does the EU taxonomy make a material difference to European companies’ sustainability reporting?

GERRITSEN Yes, I think it will make a material difference to corporates in Europe. We have the benefit of already doing a lot of work on this front, so it is relatively easy for us to adjust our reporting to be in line with the taxonomy. But I think this will be a challenge for a lot of European companies, especially given the speed at which the taxonomy is coming.

The taxonomy is not yet compulsory in fiscal-year 2021 but companies are recommended to include it in annual reporting. It will be fully compulsory in 2022. It is definitely a challenge for corporates to act in line with this, but I think it is a good thing.

We are making sure the data we have and the way we report it is in line with the taxonomy. We also report on the SDGs. We are already reporting on certain KPIs we have defined as well as progress toward goals such as being zero waste and a net-zero footprint by 2030, and the path for getting there.

We talk to clients every day and I have to say sustainability reporting and disclosure is probably one of the biggest headaches we hear about. There is an alphabet soup of big reporting standards and soon we will also have standards from IFRS. Alignment is happening, but we are obviously not yet there.


DAVISON Does the EU taxonomy effectively play the same role as the TCFD?

CHO TCFD is about the materiality, and specifically the financial materiality, of climate risk. This is why it is increasingly becoming mandatory, including just recently in Singapore.

We are about to launch a consultation on this and we are the only exchange that has occupied the vice chairship of the TCFD since its founding, so we are very much involved in its shaping. TCFD is a really good framework for companies to think through their strategic approaches, which is why I think it is so well accepted.

More than 700 SGX-listed companies have had sustainability reporting against five key components on a comply-or-explain basis for the last five years, and more than 90 per cent of these companies have selected, on a voluntary basis, to follow GRI [Global Reporting Initiative].

Adherence to SASB [Sustainability Accounting Standards Board] has also increased over time, but typically this is SASB together with GRI rather than SASB by itself. The movement for SASB is being driven by investors looking at materiality from a financial perspective and we expect SASB reporting will continue to increase.

How TCFD links to other taxonomies is a big question. With all the work going on around materiality and alignment, there clearly needs to be more done between the taxonomy standards as well as on disclosure standards.

For example, we have been doing a lot to try to distil the key KPIs that are common across TCFD, SASB, GRI and even some ESG [environmental, social and governance] ratings, to see what the most material indicators are across each component of E, S and G.

But even if a company were fully to report on these, it would not satisfy all the needs of the EU taxonomy. This requires an application of thresholds on a quantitative basis.

Taxonomies have been created to achieve the goals of the Paris Agreement by channelling capital flows toward these goals. But unless there is further alignment of disclosure standards and requirements, the investor community is going to have a big conundrum. It will be asked to report on standards it does not have information to report on.

This is why we need closer alignment between the drive toward disclosure for capital-flow alignment and what companies are expected to disclose.

I have just been appointed to the financial-sector experts group for the UN Framework Convention on Climate Change “race to zero” and “race to resilience”. One of the key roles this group will undertake is seeing how better to align financial direction.

MUENKEL We talk to clients every day and I have to say sustainability reporting and disclosure is probably one of the biggest headaches we hear about. There is an alphabet soup of big reporting standards and soon we will also have standards from IFRS [International Financial Reporting Standards] Foundation. Alignment is happening, but we are obviously not yet there.

Companies also have to deal with the practicalities of collecting data. It sometimes sounds as if it is really easy to click a button and access all the data a business would need. But this is not the reality when we talk to clients.

DAVISON Australia does not have a taxonomy and is not moving to mandatory TCFD reporting. Is it a challenge to report without strong policy frameworks in place and could Australia benefit from a mandatory disclosure regime?

CASTILLO I think it would certainly be helpful. A lot of time and effort has already been spent to develop standards across various jurisdictions. Accordingly, there is no sense in trying to reinvent the wheel in Australia. Rather, we could look to apply lessons from elsewhere to how we can best serve companies and issuers in Australia. Applying these standards would ensure we benefit from the global experiences and efforts.

TRIGONA We are looking to attract an international investor base so we must consider the reporting requirements of global investors.