Australia’s corporate regulator says it will consider “enforcement action” against listed companies which obscure the risks climate change poses to their business or fool investors with greenwashing campaigns.
Speaking at the Australian Financial Review’s CFO Live summit on Monday, Australian Securities & Investments Commission (ASIC) commissioner Cathie Armour said climate change disclosures should be a primary focus for listed companies heading into 2022.
“We believe climate change is a systemic risk for our financial system,” Armour said.
“As a result, we have all observed that investors require listed companies to disclose meaningful and useful information to enable the physical and transitional risks of climate change to be priced so that capital can be allocated efficiently.”
Major companies face significant physical and financial risks by moving the wrong way on climate-sensitive projects, but investor groups also fear Australian firms could lose out on international capital if they don’t take climate risk disclosures seriously.
As it stands, ASIC encourages listed firms to make voluntary climate-related disclosures based on the framework offered by the international Task Force on Climate-related Financial Disclosures (TCFD).
ASIC is focused on ensuring climate disclosures, including those made voluntarily in accordance with the TCFD, “comply with the law by being decision-useful for investors and support our objective of fair and efficient markets overall,” Armour said.
A September PwC report found 87% of ASX200 companies undertook “meaningful” ESG reporting over the previous year, including insights into how they plan to manage the physical and transitional risks posed by climate change.
But some 62% failed to express their “short, medium and long-term goals”, including climate plans.
“Our objective is to ensure the strategy being promoted – be it about climate change or ESG more broadly – matches what is done in practice,” Armour said.
ASIC will liaise with companies which need a nudge to provide more suitable climate disclosures, and may consider issuing guidance and education to investors themselves, Armour said.
But the regulator also reserves the right to issue crackdowns when listed companies fudge the details of their climate change risk exposure or mislead investors on their mitigation efforts.
“We may also consider enforcement action in egregious circumstances,” Armour said.
Her speech also touched on legislated climate disclosures overtaking the current voluntary model.
“We are also keeping a close eye on approaches taken by international regulators – particularly those such as the UK and New Zealand, which have announced their intention to legislate mandatory climate change disclosures,” she said.
The International Sustainability Standards Board, a group of global watchdogs convened at the COP26 climate conference, is expected to release its own climate standard in 2022.
ASIC will be watching closely, Armour added.