ASIC releases updated guidance on climate change-related disclosure

ASIC has released an updated guidance to help entities comply with their disclosure obligations relating to climate change-related risks and opportunities in prospectuses and the operating and financial review.

The corporate regulator also said that it will conduct surveillances of climate change-related disclosure practices by selected listed companies next year.

Read more: APRA: “No excuse for inaction” on climate change

The updates, contained in Regulatory Guide 228 and Regulatory Guide 247, were released following a 2017 senate inquiry report on carbon risk and the government’s response, which encouraged ASIC to consider whether its high-level guidance on disclosure remained appropriate.

The updated guidance described climate change as “a systemic risk that could impact an entity’s financial prospects for future years,” reminding directors to:

• disclose climate risk in an operating and financial review (OFR); and
• incorporate the types of climate change risk developed by the G20 Financial Stability Board’s Taskforce on Climate Related Financial Disclosures (TCFD) into the list of examples of common risks that may need to be disclosed in a prospectus appearing in Table 7 of RG 228.

ASIC Commissioner John Price also welcomed the continuing emergence of the TCFD framework as the preferred market standard, both here in Australia and internationally, for voluntary climate change-related disclosures.

“While disclosure is critical, it is but one aspect of prudent corporate governance practices in connection with the mitigation of legal risks,” Price said. “Directors should be able to demonstrate that they have met their legal obligations in considering, managing and disclosing all material risks that may affect their companies. This includes any risks arising from climate change, be they physical or transitional risks.”