Improving transparency on climate and sustainability

The Australian Government has published its Sustainable Finance Roadmap – designed to help Australia reach net zero. The roadmap focuses on mobilising private capital by modernising financial markets and maximising the economic opportunities associated with energy, climate and sustainability goals.

The Australian Finance Industry Association has welcomed the plan, as has the Australian Land Conservation Alliance.

In development since 2022, the roadmap sets out three pillars on which the policy is based, and the first pillar– ‘improving transparency on climate and sustainability’ is the focus in this article.

To improve transparency, the government has detailed the following four priorities.

Priority 1: Implementing climate related financial disclosures

Assuming legislation passes parliament, Australia’s largest companies and financial institutions, as well as entities above the publication threshold of National Greenhouse and Energy Reporting (NGER) scheme disclosure requirements, will have new, mandatory climate related financial disclosure requirements.

These requirements are due to be finalised by the Australian Accounting Standards Board (AASB) in August 2024, with the Australian Securities and Investments Commission (ASIC) to engage with and assist reporting entities to meet these requirements. This includes issuing guidance and considering how the new regime will impact existing class and individual financial reporting relief.

Assurance standards will be developed in late 2024, after the release of final international assurance standards in September.

Priority 2: Developing the Australian Sustainable Finance Taxonomy

The Government seeks to partner with the Australian Sustainable Finance Institute (ASFI) to provide a source of guidance and consistency for firms, investors, and regulators.

The initial taxonomy will be available for use on a voluntary basis by both the private and public sectors and will be designed for improving transparency, and supporting the development of credible sustainable finance products.

It will cover ‘green’ and ‘transition’ activities that contribute to climate change mitigation, in six priority sectors:

• electricity and energy
• Industry
• built environment
• transport
• resources
• agriculture
• land.

The taxonomy is due to be finished by the end of 2024.

Priority 3: Supporting credible net zero transition planning

The Federal Treasury department are to assist businesses to report their own energy transition plans. In addition to updated guidance from ASIC to support compliance with new climate disclosure obligations, Treasury will develop and publish guidance on best practice transition plan disclosures before the end of 2025. This guidance will consider:

• Priorities of transition plan preparers (e.g. companies) and users (e.g. investors).
• Emerging domestic and international frameworks and standards including the UK’s Transition Plan Taskforce Disclosure Framework, outcomes of the G20 Sustainable Finance Working Group’s transition plan workstream; and the International Platform on Sustainable Finance’s Transition Working Group.
• The Government’s upcoming Net Zero Plan and sector decarbonisation pathways, and how they may support or interact with corporate transition planning guidance.
• Observed transition plan disclosure practices by Australian companies, both before and after implementation of the Government’s climate disclosure reforms.

Priority 4: Developing sustainable investment product labels

This priority seeks to establish consistent labels and disclosure requirements to make it easier for investors to find out if a product they are considering is regarded as sustainable.

Treasury is developing this new classification system, and the government says it will consider issues including how sustainable investment product marketing is already done in Australia and overseas, and how this new regime would interact with sustainable finance frameworks, such as the proposed Australian Sustainable Finance Taxonomy, and broader climate and sustainability activities like emissions reduction targets.

The labelling regime is due to go out for public consultation in early 2025 and take effect in 2027.

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Visit our blog again soon for updates regarding pillars two, and three of the Sustainable Finance Roadmap.

If you have concerns on how these changes may impact your organisation, please reach out to our Sustainability Specialists.