Climate reporting finally compares apples to apples: ASIC

ASIC commissioner Kate O'Rourke says the mandatory climate reporting introduced this year will help investors for the first time and provide a baseline for comparability and consistency on climate-related financial disclosures.

O'Rourke said the regulator, however, does not want the baseline to become the benchmark.

"Instead of apples and oranges, we're kind of in the orchard where the apples come in different shapes. They're not kind of that uniform [shape] that you see in the supermarket yet, but they are all apples for apples. And we're moving into the comparability that's much easier than we were in the apples and oranges world," she said.

On its observations from the early reporting, ASIC reiterated the importance of being clear and effective on the judgements that are applied in preparing climate statements.

"We think that close attention is required to disclosure of judgements for helping readers understand what weight to put on information," O'Rourke said told the recent Responsible Investment Association Australasia (RIAA) Conference.

She added it is important that the disclosure of voluntary or additional climate-related information doesn't obscure the mandatory and material climate-related financial information.

"There was a lot of latitude historically, including putting it together, and we recognise people might want to convey additional information as well. There's no problem with that. It's just about [ensuring] the line between the statutory information is well defined and any other information," she said.

ASIC has also seen issues where people were cross-referencing to things that didn't meet the requirement set in the reporting framework.

"Standards in relation to cross-referencing are actually quite specific and prescriptive. The cross reference to another report to introduce that into the report has to be available on the same terms and at the same time," she said.

The regulator is also keeping an eye out on the issue of disclaimers being in conflict with the statutory framework and the objectives.

ASIC's issue with prospectuses and other documents are also under the spotlight.

"It's not new. But if they go too far, if people try and disclaim the capacity to rely or use the information too far, then that's inconsistent with the requirements of the climate reporting," O' Rourke said.

She highlighted the importance of using past events, current conditions, and forecasts consistently as ASIC saw instances of companies preparing their risk disclosure without referencing past events that happened to that company.

Another area that stood out for ASIC included climate-related targets set by companies.

"Lots have, but they were varied, especially whether they had a climate-related target. So different approaches to the assessment of whether targets had to be met under law or regulation... so just that concept of whether it's required or not," she said.

O'Rourke said ASIC as the regulatory body aims to take a pragmatic and proportionate approach to supervision and enforcement as the requirements are being phased in.