‘A logical step’: Finance industry backs push on mandatory climate disclosure

The financial services industry has strongly backed a government push to make disclosure of climate-related risks mandatory for companies and financial institutions, in legislative changes that could come into force for larger businesses as soon as next year.

The federal government on Monday started a consultation process with the industry as it works to introduce standardised, internationally aligned reporting requirements for businesses to report on the physical and transition risks from the impact of climate change.

The move follows the passing of legislation in countries such as New Zealand and the United Kingdom which have made climate-related disclosures mandatory for certain businesses. The US, Switzerland and Singapore are also developing similar requirements, as international markets increasingly recognise the risk to the global financial system brought on by climate change.

If Australia lags other comparable jurisdictions in this area, it risks missing out on international investment, Treasurer Jim Chalmers told an Australian Sustainable Finance Institute forum on Monday.

He also said the government would be focusing on greenwashing, asking regulators to double down on efforts to crack down on dodgy sustainability claims from businesses.

The announcement to start developing a climate disclosure regime was welcomed on Monday by peak finance industry bodies, including the Financial Services Council, the Australian Council of Superannuation Investors and the Responsible Investment Association of Australasia.

Senior leaders from some of the countries largest financial institutions and investors, including the big four banks, super funds Aware Super, HESTA and Cbus, fund managers such as IFM Investors and Fidelity, and insurers Allianz and IAG, also endorsed a joint statement supporting the measures.

‘Mandatory disclosure will help investors and customers make better decisions, regulators combat greenwashing, and businesses identify and manage sustainability-related risks and opportunities.’

“Mandatory disclosure will help investors and customers make better decisions, regulators combat greenwashing, and businesses identify and manage sustainability-related risks and opportunities,” they said. “The disclosure rules should promote accurate, transparent, consistent reporting of information with quality and comprehensiveness improving over time.”