Understanding the new EU Nature Restoration Law
by Ida Bailey
We welcome the Australian Government’s initiative to introduce climate-related reporting requirements. As impacts of climate change become more palpable, improving corporate disclosure will help make the Australian economy more resilient and accelerate its transition to net-zero and beyond. Our response is informed by the experience of our global team who have been delivering climate-risk advisory projects since the launch of the TCFD recommendations. From this experience, this is what we think Australia needs to consider, to get it right.
There is a lack of cohesive and comparable TCFD disclosures in Australia, despite ACSI reporting that the majority of companies are adopting the recommendations. Ensuring a phased approach is needed to allow sufficient time for companies to develop the skills and resources to better understand their risks and opportunities, improve data quality and produce reliable disclosures.
As has happened in other jurisdictions, capturing large, listed entities, large financial institutions, and large non-listed companies in high-emitting sectors in the first disclosure cycle will ensure the largest potential risks are captured, before rolling out to smaller companies in later years.
“In our experience, for companies captured by mandatory reporting requirements in the UK, it has taken approximately a year and a half to adequately conduct the foundational work required to report in line with TCFD recommendations. A phased approach to mandatory disclosure is essential to ensuring the integrity and accuracy of the information reported.”Julia Sequeira, Managing Consultant & joint TCFD lead, UK
Climate-risk reporting will be focused on the impact of climate change on businesses. However, we believe that companies should also be compelled to address their impacts on climate change, through robust science-aligned emissions reduction targets, as well as, more broadly, how they plan to transition their business model in a net-zero economy. The guidance should also consider social implications within these plans and how companies are responsible for enabling a just transition.
We suggest following the guidance that has been established by the Transition Plan Taskforce (TPT) in the UK around transition plans.
We believe that climate disclosures should ultimately be subject to the same level of assurance as other financial statements. The purpose of this reporting is to integrate climate-related financial disclosures into mainstream reporting, and therefore climate disclosures should be subject to the same standards. However, we understand that it will take time to develop an assurance ready response, and therefore recommend a phased approach to assurance.
We believe that the RBA, as a member of the NGFS, has a role to play in providing access to scenario data, translated into an Australia specific context. This would give a readily available common source as an option for climate scenario data, should companies choose to use it. Both New Zealand and the UK have undertaken assessments to interpret and localise the data from the SSP’s into a local context. We suggest that the RBA and CSIRO collaborate to localise the SSP’s to the Australian context.
Get in touch if you’d like assistance in determining your exposure to climate-related risks and opportunities, setting robust targets, or developing a long-term transition plan.
by Ida Bailey
by Stewart Lenton
by Michelle Gluck, Carol-Ann Fletcher