(16 May 2022 – Australia) CBA's sustainable economics team reports that regulations including the draft International Sustainability Standard Board (ISSB) and United States (US) Securities and Exchange Commission (SEC)'s proposed climate reporting regime could standardise climate-related disclosures across companies and support decision making for key stakeholders.
Climate-related disclosures are currently voluntary in Australia for the most part however Australian law stipulates listed companies to consider and disclose all relevant risks, including climate-related risks. CBA cites four main drivers for corporates to enhance sustainability reporting
- Risk assessment and strategic planning
- Access to cheaper finance
- More efficient capital allocation
- Regulatory and investor pressure
“Australia has generally lagged behind other jurisdictions in mandating climate disclosures. They're broadly voluntary, although there is the NGERS framework that requires that certain companies report on greenhouse gas emissions data, but that is only a small share of APRA-regulated entities. The ISSB standard, I think, is a really huge step towards sustainability disclosures here in Australia” commented CBA Senior Associate Currency Strategy and International Economics, Carol Kong.
“I think increased transparency on climate disclosures helps to provide a clearer picture of companies' carbon footprint, thereby incentivising them to cut emissions. Carbon offsets provide companies with an opportunity to achieve their climate ambitions. In my view, with or without regulatory pressures or even a government mandate, I think the extent of climate-related disclosures will only go in one direction, and that is up” she said.
“We are likely to see greater quantity and quality of climate reporting in Australia. A lot of Australia's top trading partners have mandated or will consider climate mandated reporting. Australia is likely to be a price taker of this development of climate-related disclosure, to use an economic analogy” Kong added.