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Climate change disclosure updates

The corporate regulator has updated its guidance around climate change-related financial disclosures.

The affected regulatory guides are RG 228 Prospectuses: effective disclosure for retail investors, and RG 247 Effective disclosure in an operating financial review.

“Climate change is an area on which ASIC continues to focus. The updates to our regulatory guidance, together with the publication last year of Report 593, round out ASIC’s response to the Senate Report on Carbon Risk. Our updates will help stakeholders to comply with their disclosure obligations in prospectuses and the operating and financial review for listed companies,” ASIC Commissioner John Price said, earlier this week.

The Australian Securities and Investments Commission (ASIC) explained that these updates come as a result of recommendations made by the Senate Economics References Committee report on carbon risk and the Government’s response to that.

The key changes, as highlighted by the corporate regulator, include:

  • the incorporation of the types of climate change risk developed by the G20 Financial Stability Board’s Taskforce on Climate Related Financial Disclosures (TCFD) into the list of examples of common risks that may need to be disclosed in a prospectus appearing in Table 7 of RG 228;

  • RG 247.66, highlighting climate change as a systemic risk that could impact an entity’s financial prospects for future years and that may need to be disclosed in an operating and financial review (OFR); and

  • RG 247.66, reinforcing that disclosures made outside the OFR (such as under the voluntary TCFD framework or in a sustainability report) should not be inconsistent with disclosures made in the OFR.

“While disclosure is critical, it is but one aspect of prudent corporate governance practices in connection with the mitigation of legal risks. Directors should be able to demonstrate that they have met their legal obligations in considering, managing and disclosing all material risks that may affect their companies. This includes any risks arising from climate change, be they physical or transitional risks,” Price said.

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