This month, Australia’s parliament passed landmark mandatory climate reporting legislation, which begins for the largest Group 1 entities on 1 January 2025. At the AICD’s Forum, ASIC Commissioner Kate O’Rourke said the regulator would take a ‘pragmatic and proportionate’ approach to enforcement. Updated AICD guidance to assist directors will be released shortly.
Also in this newsletter:
- Australia’s journey to a net zero economy is detailed in a new Sector Pathways Review.
- Nature to take centre stage in global summit; Minister for the Environment and Water called business to action on nature, but says Government has no immediate plans to mandate nature reporting.
- Market update: ASIC continues actions to deter greenwashing; HESTA wants to see more action on climate and nature loss; AGM season kicks off with several climate and biodiversity-related shareholder requisitions.
Landmark legislation passes federal parliament, establishing mandatory climate reporting
The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, containing landmark mandatory climate reporting reforms, passed the House of Representatives on 9 September 2024, following its successful passage through the Senate on 22 August 2024. The legislation passed with one material amendment to the original March 2024 Bill: the requirement for disclosure against a second mandatory climate scenario, known as the hot-house scenario, where warming 'well exceeds' a 2°C threshold (read the AICD article on the Legislation). The AICD and other groups including ACSI and IGCC welcomed the passage of the legislation.
What happens next?
Information about the sustainability reporting requirements under the Corporations Act 2001 (Cth) is now available on the ASIC website.
- ASIC will develop regulatory guidance, assess applications for relief and supervise compliance with the new obligations.
- AASB is due to issue the finalised Australian sustainability reporting standards later this month – the substantive requirements are not expected to change from those reported previously.
- AUASB has released a proposed assurance timetable for consultation (until 16 November) and draft sustainability auditing standards.
Refreshed mandatory reporting guidance to be released shortly
AICD, in collaboration with Deloitte and MinterEllison, will publish Version 2 of our Director’s Guide to Mandatory Climate Reporting resource later this month. It is currently being updated to capture the latest legislative and sustainability standards developments. When available, a link to the Version 2 Guide will be emailed to AICD members, replacing the original guide which has been accessed more than 20,000 times.
Australia’s journey to net zero detailed in new Sector Pathways Review
This month, we gained further insights into the Australian Government’s strategy for achieving a net zero emissions economy. The Climate Change Authority, chaired by former NSW Treasurer Matt Kean, released its review of Australia’s technology transition and emissions pathways to reach net zero by 2050. Commissioned by the Australian Parliament, the Sector Pathways Review is a key deliverable for the independent authority, which is also responsible for advising government on the country’s forthcoming 2035 emissions reduction target.
The review outlines six potential pathways and recommends actions to address known barriers for the six highest-emitting sectors:
- electricity and energy;
- industry and waste;
- transport;
- built environment;
- resources; and
- agriculture and land.
Rather than setting specific emissions reduction targets, the review focuses on the abatement potential of each sector. The review will inform government departments as they develop transition plans for each of these sectors. Their efforts will culminate in a more comprehensive, overarching national Net Zero Plan, expected in 2025. Find out more, in our article.
Nature and biodiversity – the other side of the climate coin
Nature and biodiversity were front and centre at this year’s AICD Climate Governance Forum. The Minister for Environment and Water Tanya Plibersek said: ‘Biodiversity really is the other side of the coin, and whatever we are doing when it comes to climate change has the potential to protect biodiversity and even improve it. Whatever we do to improve biodiversity also helps us meet our climate change objectives as well.’ The Minister confirmed at the Forum that the Government has no immediate plans to mandate nature reporting in Australia, with nature-related financial reporting remaining voluntary. However, momentum continues to build around nature-reporting frameworks at both the international and domestic levels. Read our article here.
Record registrations for the Climate Governance Forum 2024
The AICD hosted its third annual Climate Governance Forum on 23 August 2024, attracting almost 2,000 registrations. The day-long event featured a variety of presentations and panel discussions, with highlights including:
- James Graham AM, Chair of Coles, delivered a keynote address focusing on the importance of embedding sustainability into core business strategies and operations.
- With the Forum held the day after the Senate passed the Climate Reporting Bill, ASIC Commissioner Kate O’Rourke highlighted that their enforcement approach will be pragmatic and proportionate: 'This is not about nit-picking everything that people say. We see this as kind of an ecosystem. We're all in it together.’
- A panel discussion titled ‘Responding to the ESG Backlash’ explored the root causes of the backlash and strategies to mitigate it. Panellists stressed the need to align sustainability with core business strategies, articulating how sustainability drives long-term value creation.
- In a breakout investor session, panellists acknowledged the decarbonisation challenges faced by companies. They advised organisations to prioritise their long-term climate strategies and targets and to foster constructive, two-way dialogue with investors and proxy advisers.
- A concurrent discussion explored how not-for-profits (NFPs) can tackle climate change. Panellists offered practical advice on how NFPs can embark on their climate governance journeys, referencing the AICD and PwC’s Climate Governance for NFP Directors guide.
- During a Q&A session, The Hon Tanya Plibersek MP, Minister for the Environment and Water, announced a Productivity Commission inquiry into boosting the circular economy. A nature panel also discussed how companies can assess nature and biodiversity risks across supply chains despite limited data.
- The final session, Transition Planning, included a presentation on the UK’s Transition Plan Taskforce, which has set the ‘gold standard’ in transition plans. The director panel stressed the importance of integrating these plans into overall business strategy.
You can also read our online Forum highlights article and keep an eye out for more in the next Company Director magazine.
Market developments update
ASIC misleading claims actions to deter greenwashing: ASIC reported that it had made 47 regulatory interventions to address greenwashing over a 15-month period leading up to 30 June 2024, including the commencement of two Federal Court proceedings (against Active Super and Vanguard), and over $123,000 in infringement notice payments. The regulatory interventions related to:
- insufficient disclosure on the scope of ESG investment screens and investment methodologies;
- underlying investments inconsistent with disclosed ESG investment screens and investment policies; and
- sustainability-related claims made without reasonable grounds or without sufficient detail.
The report also details findings, recommendations and good practice examples (e.g. disclosing progress against climate targets and disclosing proxy voting and engagement) from ASIC’s surveillance activities.
HESTA calls on ASX300 to take more action on climate change, nature loss, gender equality and decent work: The $87 billion profit-for-member super fund, HESTA, in its fifth annual letter to ASX300 chairs and CEOs, outlined climate change as one of four key material issues on which it will engage with companies in the 2024-25. CEO Debby Blakey said HESTA’s focus on climate action will be: ‘on ensuring boards have the right mix of skills and capabilities needed to transition their business to a low-carbon future. We’re also looking for credible climate plans, especially from energy, resources and industrial companies, that bring forward investment in new technologies.'
AGL, nation’s biggest carbon emitter, awarded stellar ESG rating: The AFR reports that proxy adviser Glass Lewis gave AGL Energy a score of 9.1 out of 10 on ESG grounds. The score included: 10 out of 10 on ESG transparency; 9.3 on climate risk mitigation; 8.6 on board accountability; and 8.3 on targets and alignment. However, Glass Lewis also assessed AGL Energy’s carbon performance as 'not aligned' with international targets and national pledges made under the Paris Agreement.
Nature law reforms could be delayed as Labor struggles to win Greens support for pared-back EPA: As the government prepares its nature positive bill for senate debate, the ABC reports Prime Minister Anthony Albanese has ruled out inserting a ‘climate trigger’ in the Environment Protection Agency (EPA) legislation, which could see proposed resources projects barred on environmental grounds. The Prime Minister has reportedly left the door open for regulators to consider the climate effects of new mines, gas projects and agricultural developments.
Activists take salmon fight to supermarkets: After a quiet year on shareholder requisitions in 2023, it looks like there is an uptick in 2024, with species protection shareholder resolutions being commenced against Woolworths and Coles. APA has also received a requisition requesting a report on APA’s capital expenditure in relation to its climate commitments. In August, BHP also announced it had received a shareholder resolution requesting it provide additional disclosures about its plans for scope 3 emissions reductions.
Pension fund investors call for FTSE 100 climate votes: Local Authority Pension Fund Forum and CCLA Investment Management, the Church of England's investment manager, wrote to the chairs of 76 FTSE 100 companies which have not held a vote on their climate transition plans in the past three years. The letter notes that investors expect companies to set out credible transition plans, that include Paris-aligned targets and detailed strategies for achieving those goals. Internationally, it seems there has been a shift away from ‘say on climate’ resolutions which peaked in 2022 towards enhanced disclosure of transition plans.
Urgent review of Woodside billion-dollar WA gas project needed to protect threatened snake, government advisers say: Conservation scientists have called for fossil fuel activity in the location of Woodside’s proposed multibillion Browse gas project to be urgently reviewed to protect the endangered sea snake, according to reports in The Guardian. Meanwhile, the Future Fund reveals it voted against Woodside’s climate plan. Zurich climate risk index: This month, Zurich and Mandala released the first Climate Risk Index for the Australian tourism sector. The Index established that half of Australia’s 178 tourism assets (112 man-made, 66 natural) are in an elevated risk category, facing considerable climate and natural peril risk.
In brief:
- In a busy week for climate and energy bills, the Net Zero Economy Authority was successfully legislated in the Federal parliament.
- The Government recently responded to a review of corporate emissions reporting and highlighted it was considering opportunities to build on work to overcome sustainability-related data challenges for climate-related financial disclosures (e.g. scope 3 emissions).
- Minister for Climate Change and Energy, Chris Bowen, declared an amended offshore wind zone off the coast of Bunbury, Western Australia, following extensive community consultation.
- Clean Energy Finance Corporation (CEFC) announced a $70 million investment to decarbonise Australian ports.
Limited places remain to register for the AICD’s climate short course for 2025 – don’t miss the chance to secure your place
The AICD’s Climate Governance for Australian Directors is an online short course delivered in two-hour classes over four weeks. It is designed to equip you with contemporary knowledge of climate governance and the skills needed to confidently navigate its complexities. Course spots are selling out quickly with the program receiving very positive feedback from participants. Confirm your place now.
Build foundational knowledge with the climate e-learning module
The Introduction to Climate Governance e-learning module is free for AICD members and is a valuable starting point on a director’s climate governance journey.
For the calendar:
- 22–29 September 2024: Climate Week NYC (including Climate Governance Initiative event – Navigating climate risk and opportunities for boards – Livestreamed on 23 September 2024)
- 8–10 October 2024: Global Nature Positive Summit, Sydney
- 21 October–1 November 2024: COP16 United Nations (UN) Biodiversity Conference, Cali
- 11–22 November 2024: COP29 UN Climate Change Conference, Baku
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