Australian government commits budget to mandatory reporting
The Australian federal government seems likely to start sounding industry on mandatory climate reporting in the wake of November’s UN Climate Change Conference, having renewed its commitment to such a regime and directed budget funds to support its development.
In the 2022/23 budget, delivered on 25 October, the government earmarked A$36.1 million (US$23.1 million) to climate risk reporting over four years, including A$29.8 million aimed at restoring Treasury’s climate risk modelling capabilities. The remaining A$6.2 million will support Treasury and the Australian Accounting Standards Board to develop and introduce climate reporting standards in line with international reporting requirements.
Stephen Jones, assistant treasurer and minister for financial services, told KangaNews on the sidelines at the Australian Sustainable Finance Institute (ASFI)’s Sustainable Finance Summit in Sydney on 28 October that the government plans to complete its first federal budget and participate in the upcoming UN Climate Change Conference (COP 27) before pressing ahead with mandatory reporting. COP 27 is taking place on 6-18 November at Sharm El Sheikh in Egypt.
“We wanted to get COP 27 done and have it factored into what we are doing in this space,” Jones says. “But you can take a hint from the fact that we put funds for dealing with this issue in the October budget. We have seen an urgent need for working on this – we want these things done yesterday.”
Jones notes that Treasury is conducting several industry consultations and some of these will need to be finalised before it begins work on mandatory climate reporting. “We want to do it, there is no lack of urgency on our part – we will not be standing around this time next year asking when that consultation will start.”
Speaking at the ASFI event, Jones said working with industry on a green taxonomy that aligns with international standards is a critical issue for the government. Federal treasurer Jim Chalmers plans to meet with ASFI shortly.
“We have an absolute commitment to pick up the baton that has been laid by industry, and ensure we can accelerate it and put in place standards [industry] needs together with government-led policy,” he said.
ASFI published the second progress tracker of its Australian Sustainable Finance Roadmap on 28 October. The report says progress has accelerated over the last 12 months but significant work is still required to ensure capital flows to activities that will create a sustainable, resilient and inclusive Australia.
“The concept of sustainable finance is moving from the margins and into the mainstream of leading financial institutions, national treasuries and financial regulators,” says Kristy Graham, executive officer at ASFI in Canberra.
However, she added: “We remain at the very early stages of our journey. In particular, Australia lags behind jurisdictions like the UK, EU and Singapore on sustainable finance policy and regulation. We need to accelerate progress to match the urgency of the challenges before us. This will require an unprecedented level of action and collaboration across the entire financial system.”
More than a dozen jurisdictions have pressed forward with mandatory climate reporting already. But the change of federal government in May has sparked endeavours to make up for lost time, including progress on a range of sustainability and climate-related issues.
The highest profile of these was the passing of the Climate Change Act, in September. The new law implements national net zero commitments and codifies 2030 and 2050 emissions reductions targets under the Paris Agreement. Sustainable finance market participants believe progress on the introduction of a mandatory reporting regime aligned with the Task Force on Climate-related Financial Disclosures (TCFD) could be just as significant.
Pointing to the roadmap tracker, Graham said: “We want to ensure that the Australian financial system is aligned to a climate transition and has a strong focus on restoring Australia’s natural ecosystems and building a more inclusive economy.”
A range of speakers at the ASFI summit expressed their support for mandatory reporting. Damian Graham, chief investment officer at Aware Super in Sydney, told attendees the implementation of widely accepted reporting standards is the best way to create sustainable momentum and change. The super fund’s climate reporting already aligns with the TCFD framework, he added.
“One of our core beliefs is that managing ESG [environmental, social, and governance] risks will deliver better returns for our investors in the long term, so this is core to what we do,” Aware Super’s Graham said. “I don’t know exactly what will come from talks [between Chalmers and ASFI], but I imagine they will be pragmatic. The government is focused on the right positive outcomes.”
Michael Chen, executive director and head of ESG at Westpac Institutional Bank in Sydney, agreed that the federal government’s commitment to climate reporting is an encouraging development. “We will continue to see more consistent and comparable reporting over the coming years, which I’m really encouraged by,” he noted.
Viv Bower, group executive corporate affairs and sustainability at QBE in Sydney, also said boardrooms are increasingly aware of the climate reporting issue. “These conversations are moving faster than I thought they would,” she noted. “We are seeing this globally and we can learn so much from it. The landscape is changing rapidly now and we are starting to see change in Australia, too.”