The Australian Government this week released a consultation paper to develop an Australian climate risk disclosure framework that will provide businesses and investors with clarity to manage climate risks and invest in new opportunities.
“[This internally-aligned framework] will ensure large business and financial institutions are providing more information and great transparency on how they are responding to climate change and supporting the transition to net zero,” Treasurer Jim Chalmers said in a statement.
The framework is expected to be designed in line with the International Sustainability Standards Board’s climate reporting framework. Industry participants will have until 17 February 2023 to make submissions on the consultation paper.
Treasury will also work on a sustainable finance strategy to improve transparency and deepen Australia’s green finance markets to ensure Australia is well positioned to take advantage of investment opportunities in sustainable finance.
Science-based taxonomy
The government’s announcement comes in the same week the private sector-led Australian Sustainable Finance Institute (ASFI) released more details on the design of the sustainable finance taxonomy.
The key recommendation is the guiding principles of the taxonomy should be credibility, usability, interoperability, prioritisation and impact, ASFI chief executive Kristy Graham tells Investment Magazine. “That means that it is a science-based taxonomy and the scientific integrity of the technical screening criteria will be critically important.”
Another important recommendation is the inclusion of a transition category, recognising Australia’s reliance on fossil fuels. “That is a key driver for why Australia should be doing this work ourselves, rather than just adopting a taxonomy framework,” she says.
“There’s broad agreement that we need a transition category and using a traffic light system as a colour coding framework to communicate the different categories is a very useful approach that the Singaporeans and ASEAN [Association of Southeast Asian Nations] taxonomies have done.”
The recommendations are open for feedback until mid-February before final recommendations are released in March.
The government’s move to improve climate-related disclosure will bring Australia in line with other international financial markets, boosting investor decision making. “Having government pulling in the same direction is a huge positive,” says Graham.
