ob体育 has today published updates to clarify the application of ob体育鈥檚 existing regulatory guidance to the disclosure of climate change related risks and opportunities.
The updates are contained in:
- Regulatory Guide 228 Prospectuses: Effective disclosure聽for retail investors; and
- Regulatory Guide 247 Effective disclosure in an operating and financial review
ob体育 reviewed its guidance following the recommendations of a Senate Economics References Committee report on Carbon Risk and the Government鈥檚 response which encouraged ob体育 to consider whether its high-level guidance on disclosure remained appropriate.
While ob体育鈥檚 review found that its existing, principles-based regulatory guidance remains fit for purpose, to help stakeholders to comply with their disclosure obligations, ob体育 has updated its guidance to, amongst other things:
- incorporate the types of climate change risk developed by the G20 Financial Stability Board鈥檚 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聽7 of RG 228;
- in RG 247.66, highlight climate change as a systemic risk that could impact an entity鈥檚 financial prospects for future years and that may need to be disclosed in an operating and financial review (OFR);
- in RG 247.66, reinforce 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; and
- make a minor update to INFO 203: Impairment of non-financial assets: Materials for directors to highlight climate change and other risks that may be relevant in determining key assumptions that underly impairment calculations.
RG 247 has also been updated to make clear our general view that the risk of directors being found liable for a misleading or deceptive forward-looking statement in an OFR is minimal provided the statements are based on the best available evidence at the time, have a reasonable basis and there is ongoing compliance with the continuous disclosure obligations when events overtake the relevant statement made in the OFR.
ob体育鈥檚 review of regulatory guidance follows last year鈥檚 publication of ob体育 Report 593: Climate Risk Disclosure by Australia鈥檚 Listed Companies targeting listed companies,their directors and advisors. High-level recommendations set out in REP 593 included to:
- adopt a probative and proactive approach to emerging risks, including climate risk;
- develop and maintain strong and effective corporate governance which helps in identifying, assessing and managing risk;
- comply with the law where it requires disclosure of material risks; and
- disclose meaningful and useful climate risk related information to investors 鈥搕he voluntary framework developed by the TCFD has emerged as the preferred standard in this regard and ob体育 strongly encourages listed companies with material exposure to climate change to consider reporting voluntarily under the TCFD framework.
ob体育 commissioner John Price said, 鈥楥limate change is an area which ob体育 continues to focus on. The updates to our regulatory guidance, together with the publication last year of Report 593, round out ob体育鈥檚 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鈥�.
ob体育 welcomes the continuing emergence of the TCFD framework as the preferred market standard, both here in Australia and internationally, for voluntary climate change related disclosures. ob体育 considers this to be a positive development and we again strongly encourage listed companies with material exposure to climate change to consider reporting voluntarily under the TCFD framework.
鈥榃hile 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.鈥� Mr Price said.
In the coming year, ob体育 will conduct surveillances of climate change related disclosure practices by selected listed companies. ob体育 will also continue to participate in the Council of Financial Regulators鈥� working group on climate risk and participate in discussions with industry and other stakeholders on these issues.