(AU) Corporate Watchdog Puts Climate Change Warnings Into Action

The Australian - David Ross

The release of the heavily redacted document from the corporate regulator comes after ASIC has repeated warnings to business on climate change risk. Source: Facebook / NASA Astronaut Scott Kelly

An internal briefing document to the corporate regulator has shown the regulator putting its climate change warnings into action, revealing deep-dive surveillance of five of the nation’s biggest listed companies.

The document, prepared for internal eyes in August last year, came only two months after ASIC temporarily suspended its investigations in June on the back of the COVID-19 pandemic.

These deep-dive surveillances of five companies in the energy, real estate, materials, consumer staples and industrials sectors have seen corporate regulators examine climate-related disclosures in public documents released by the companies. These include annual reports from those five companies, and any sustainability, environmental or climate change reports or policies.

The document reveals regulators from the Australian Securities & Investments Commission also exercised their compulsory information gathering powers to obtain and review internal company books and records.

The regulators observed those five companies’ internal deliberations and considerations, governance and risk frameworks of climate change. ASIC’s document notes their focus on a task force on Climate Change Related Financial Disclosures.

“We have provided preliminary feedback to, and are continuing to engage with, these five deep-dive target companies in relation to their climate risk governance and disclosure practices,” it said.

The deep-dive investigations come on top of “desktop” examinations of climate-related disclosure practices at 12 large ASX-listed companies.

ASIC targeted a range of companies across energy, finance, industrials, property and consumer discretionary sectors.

Corrs Chambers Westgarth partner Sandy Mak said climate change-related disclosure and risks were becoming increasingly critical for boards and shareholders.

“Recent examples in the Australian market have shown us that even if economic returns are adversely impacted, as they were at the height of the pandemic, shareholders are still holding boards ­accountable from an [environmental social and corporate governance] perspective and are unwilling to put short-term financial returns ahead of strong corporate governance,” she said.

“In 2021, boards should also take the time to conduct comprehensive scenario planning.”

Ms Mak said it was interesting that ASIC had exercised its compulsory information disclosure powers in order to find out what companies thought they should disclose.

“This suggests that ASIC is taking this sort of disclosure very seriously. It’s wanting to police the police that it put in place,” she said.

“Companies need to not take the tick-the-box approach to climate change disclosure.”

She said Australian businesses were behind their global partners on environmental, social and corporate governance.

The release of the heavily redacted document from the corporate regulator comes after ASIC has repeated warnings to business on climate change risk.

In September 2018 ASIC released the findings of its report into climate risk disclosure by Australia’s listed companies.

In August 2019 ASIC published updates to its existing regulatory guidance around climate change-related risks and opportunities.

The Council of Financial Regulators Working Group on Climate Risk has been targeting the financial fallout for businesses exposed to climate change.

The Australian Prudential Regulation Authority will undertake a climate change vulnerability assessment of authorised deposit taking institutions. ASIC and the Reserve Bank will co-ordinate with APRA on ensuring a consistent application of analysis and disclosure recommendations.

Links

• A 'high risk' jurisdiction: climate change and directors' duties
• Climate change risk disclosure: A practical guide to reporting against ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (pdf)
• Understanding and managing the financial risks of climate change
• RBA says climate change already having profound impact on Australian economy
• Big banks and super funds to face climate change risk checks
• Australian auditors lag on climate risk disclosure, expert warns
• (AU) Why Climate Change Is Keeping Directors Awake
• AU) Corporate Climate Risk Disclosures Must Show More: IGCC
• (AU) 'Breakthrough Moment': Woodside Investors Revolt On Climate Change