Legislation for climate disclosure should be internationally aligned, says Business Council of Australia

Earlier this year, the Federal Government released draft legislation that would make climate-related financial disclosures mandatory as part of a new risk disclosure framework. 

If the proposed reforms go through, relevant entities will be mandated to submit an annual sustainability report at the time of submitting their annual financial report.  

In its submission to the government regarding the draft legislation, the Business Council of Australia (BCA) has expressed support for “continuous improvement” when it comes to the quality of climate-related financial disclosures. The BCA supports the government’s view that a new risk disclosure framework can help give clarity to investors regarding climate risks surrounding investment decisions.  

“Investors need to be able to make informed decisions, risks and opportunities pertaining to climate are increasingly important for investors and a high-quality robust climate related financial disclosure reporting framework will be critical for future investments,” said the Business Council Chief Executive Bran Black. 

However, the BCA wants the proposed reforms to be aligned with international standards, so that there’s consistency and certainty around the standards that will apply to respective entities.   

An example of this in practice as highlighted by the BCA is that the standards of both – the Australian Accounting Standards Board (AASB) and the International Sustainability Standards Board (ISSB) will need to be closely aligned so that valid comparisons across jurisdictions and corporations can be made while keeping compliance costs under control.  

“There is nothing to be gained for users or preparers of disclosures if the new requirements are poorly implemented in Australia and are not aligned to international standards,” Mr Black said. 

The BCA also doesn’t want compliance enforcement to be rushed and would much rather that these reforms are implemented in the right manner. It wants an allowance of 12 months from either the date legislation is proclaimed or AASB standards published (whichever comes later) before compliance becomes mandated.  

“This is an incredibly important reform and the BCA wants to see it in place, however the goal should be taking the time to get it right, not rushing and risking failure,” said Mr Black.