The Australian Securities and Investments Commission has issued new guidance on disclosure relating to climate change related risks. The proposed changes highlight that climate change risks identified by the Taskforce for Climate Related Financial Disclosure (TCFD) may require disclosure to potential and current investors, as well as providing clarification of the interplay between voluntary and mandatory disclosures.
For Australian corporations, these updates provide useful guidance and clarification of disclosure obligations. However, it is also likely to put greater pressure on companies to ensure that management of climate risks is both done, and seen to be done. With shareholder and activist litigation trends emerging in Australia and overseas, companies can expect disclosures to be carefully scrutinised by shareholders, competitors, and activists.
ASIC has updated its guidance to, amongst other things: -incorporate the types of climate change risk developed by the [Taskforce on Climate Related Financial Disclosure] into the list of examples of common risks that may need to be disclosed in a prospectus [per] Table 7 of RG 228; -in RG 247.66, highlight 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); -in RG 247.66, reinforce that disclosures made outside the OFR (such as under the voluntary TCFD framework or... sustainability report) should not be inconsistent with disclosures made in the OFR; and -...minor update to INFO 203 ... for directors to highlight climate change and other risks that may be relevant in determining key assumptions that underly impairment calculations.