ASIC observes improvement in climate disclosures

ASIC has observed an increase in the quality, quantity, and consistency of climate-related financial information with the introduction of statutory sustainability reporting requirements.

The regulator said entities are identifying and disclosing more information about climate-related risks and opportunities including unlisted companies, many of which have not disclosed climate-related financial information before.

ASIC commissioner Kate O'Rourke said the regulator's review of a sample of 40 sustainability reports identified marked progress in disclosure reporting compared to disclosures previously made voluntarily.

"It appears that statutory reporting has not only resulted in heightened transparency, but also more meaningful engagement by entities with climate-related risks and opportunities," O'Rourke said.

"We saw examples of entities adapting or updating existing governance and risk management processes."

ASIC identified opportunities for improvements in forward-looking disclosures and those underpinned by assumption or judgement, for example in aspects of strategy and metrics and targets disclosures.

The regulator laid out eight action items for reporting entities. It encouraged entities to explain how information in the sustainability report connects with relevant disclosures in the financial report and urged them to carefully consider whether they are also able to disclose quantitative information, rather than only qualitative information.

It also encouraged entities to consider past events, current conditions and forecast future conditions, as well as how they may be affected, and called on them to provide clear, effective and proximate disclosure of relevant judgements, assumptions and areas of measurement uncertainty.

"We expect improvements over time as more information becomes available and as entities gain more experience," O'Rourke said.

Treasury recently opened a consultation to enhance efficiency of climate disclosures by reducing the cost of compliance for companies.

The reforms are intended to achieve this while maintaining international alignment between Australian standards and its global counterpart, while minimising disruption for reporting entities.

"We are supportive of measures that reduce regulatory burden whilst preserving core sustainability reporting requirements and will continue to engage with Treasury on these proposed reforms," O'Rourke said.