Climate change

Disclosure of climate change risk

The Task Force on Climate-related Financial Disclosures (TCFD) is industry led and has developed a set of recommendations for voluntary climate-related financial risk disclosures to be made within the financial filings of an entity.

In June 2019, the Task Force published a status report noting that although disclosure of climate-related financial information has increased since 2016, it is still insufficient for investors, highlighting the need for continued efforts to support implementation of the recommendations.

Australia

Australian financial regulators, including the Australian Securities and Investments Commission (ASIC) have been crystal clear on the impacts and risks of climate change to the economy. These risks may be non-financial in nature, but all risks can have financial consequences.  ASIC recently updated their Regulatory Guide for the Operating and Financial Review (OFR) to highlight climate change as a systemic risk that could impact an entity’s financial prospects for future years and that it may need to be disclosed in an OFR.

In a joint bulletin issued by the AASB and AuASB, ‘Climate-related and other emerging risks disclosures: assessing financial statement materiality using AASB/AuASB Practice Statement 2’, the two Australian bodies address climate-related and other emerging risk disclosures in the context of financial statement materiality.

The proposed 4th edition of the ASX Corporate Governance Council’s Principles and Recommendations notes that greater guidance on disclosure of carbon risk is required as boards are increasingly being called upon to address new or emerging issues which include sustainability and climate change.

It has been suggested that if entities believe that they don’t have any material exposure to environmental and social risks that they carefully consider the basis for their belief and benchmark against their peers.

New Zealand

The Government recently affirmed its support for the disclosure of material financial risks and opportunities associated with climate change and endorsed the Taskforce for Climate-related Financial Disclosures’ recommendations as one avenue for this. The Government is also considering mandatory climate-related disclosure requirements and is expected to consult with stakeholders in due course.

Call to action

Fourteen accounting bodies representing 2.5 million accountants globally, including Chartered Accountants Australia and New Zealand, have supported a call to action in response to climate change.

Resources for Accountants

• Checklist for small businesses impacted by natural disasters
• Unpacking the financial impacts of climate risk
• Climate Risk – lessons learnt for business and auditors
• https://learn.tcfdhub.org/
• https://www.tcfdhub.org/resource/webinar-do-accountants-have-a-role-to-play-in-climate-related-reporting/
• https://www.accountingforsustainability.org/abn-climate-action.html
• http://www.accountingforsustainability.org/abn
• https://www.accountingforsustainability.org/en/knowledge-hub.html?tab1=all  

CA ANZ articles and opinions

• Accountants ride to rescue the planet
• Consider non-financial risks in the reporting season
• The significance of climate related risks for business
• Putting climate change risk on the balance sheet

Other guidance

• AASB/AuASB bulletin
• ASIC report 593 climate change disclosure
• 19-208MR ASIC updates guidance on climate change related disclosure
  
  

• European Report lab – project how to improve climate-related reporting
• UK Finance reporting lab – climate-related corporate reporting
• TCFD good practice guide
• TCFD/SASB TCFD implementation guide