Climate-related financial disclosure: exposure draft legislation

The AICD supports the introduction of a mandatory climate-related financial disclosure regime which is internationally aligned and that meets the policy objectives of high-quality, comparable and useful climate disclosures.

However, the AICD has some serious concerns with several aspects of the Draft Legislation, particularly where there is clear deviation from the policy intent set out in the Policy Statement and Policy Impact Analysis. Our comments were made with the benefit of legal advice from King & Wood Mallesons, which is annexed to the submission (Annexure  B).

In summary, our key comments were as follows:

1. The omission of forward-looking representations, including transition plans, from the three-year regulatory only immunity period (Limited Immunity) is of utmost concern as it will leave companies vulnerable to private litigation in a disclosure area marred by significant uncertainty. The Limited Immunity must cover all-forward-looking disclosures required under the Australian Sustainability Reporting Standards (Sustainability Standards), including transition plans.
2. The Limited Immunity should also cover substantially similar disclosures made outside of the Sustainability Report that were originally made in the Sustainability Report, and to any legally required updates (such as required under continuous disclosure laws).
3. Director declarations should be qualified. At a minimum, directors should only be required to opine that they have ‘reasonable grounds to believe that’ the climate disclosures are in accordance with the Sustainability Standards and Corporations Act.
4. The thresholds for Group 3 entities are too low and are not commensurate with the climate impact of these entities or the expected benefit of climate reporting for their users. Thresholds should be increased to $100 million (for consolidated revenue) and $50 million (for consolidated gross assets).
5. The proposed ‘additional’ entity-level materiality threshold does not relieve the regulatory burden for Group 3 entities. It risks confusing (or even potentially undermining) the application of materiality (particular for Group 1 and 2 entities) under the Sustainability Standards.
6. We are concerned about the inclusion of Not-for-Profits (NFPs) in the absence of specific consultation with the sector, particularly given the exclusion of charities registered with the Australian Charities and Not-for-Profits Commission (ACNC).