Date posted: 25/10/2022

Federal Budget 2022-23 signals climate-related disclosures as priority

Labor Government’s Budget brings mandatory climate reporting a step closer for Australian companies.

In Brief

  • $6.2 million investment over four years to progress climate-related disclosures in Australia.
  • Budget restores Treasury’s climate modelling capability.
  • This Budget announcement follows an increasing international focus on climate-related disclosures.

The Labor Government has taken a step closer to passing Go on the mandatory climate-related disclosures monopoly board. The October Budget indicates the Government has begun to fulfil their election commitment to mandate climate-related disclosures for Australian companies with a $6.2 million investment over four years for the Treasury and Australian Accounting Standards Board (AASB). 

The Government also took steps to restore Treasury’s climate modelling capability with a $29.8 million investment over four years.

CA ANZ welcomes this initial investment, and that the development of climate standards will align with international requirements. We have been advocating for this investment and signaling of direction for some time. This aligns with other key jurisdictions including the UK and New Zealand, where mandatory climate-disclosures will commence 1 January 2023.

The sustainability road to the October Budget

This Budget announcement follows an increasing international focus on climate-related disclosures. In November 2021, the International Financial Reporting Standards (IFRS) Foundation established the International Sustainability Standards Board (ISSB), which issued exposure drafts in March 2022 of their first two standards S1 – general sustainability disclosures and S2 – climate-related disclosures.

Both exposure drafts use the structure of the Taskforce for Climate-related Financial Disclosures (TCFD) as their basis and S2 is closely aligned to the TCFD recommendations. 

The AASB has indicated their intention to use the work of the ISSB as a baseline within Australia and this funding will help them advance this work. The TCFD recommendations include disclosures across the four areas of governance, strategy, risk management, and metrics and targets. At last week’s ISSB meeting in Montreal, the Board confirmed that disclosure of scope 3 emissions would form part of the requirements of S2.

CA ANZ actively participated in the consultation on the ISSB exposure drafts and contributed to several responses including coordinating the response from 20 peak Australian bodies. We fully support a global approach to the development of sustainability disclosure standards and are supportive of the ISSB as the global body to issue these standards. 

The overarching goal should be a globally consistent, comparable, reliable corporate reporting system, from which assurance can be obtained on reported information, to provide all stakeholders with a clear and accurate picture of an organisation’s ability to create sustainable value over time.

In our response to the AASB, we suggested a phased in approach for adoption of the new sustainability standards, including climate-related disclosures, would be most appropriate. This reflects the readiness of Australian entities to adopt the proposals as whilst some large, listed entities are already voluntarily reporting in line with the TCFD recommendations, some entities will require considerable time to scale up their expertise and capacity. 

CA ANZ continues to follow international developments and engage with key stakeholders around implementation considerations and is represented on the AASB/AUASB Sustainability Reporting Project Advisory Panel and ISSB Technical Reference Group

Members, particularly in larger entities, are encouraged to familiarise themselves with the TCFD recommendations and ISSB climate-related disclosures exposure draft. 

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