Research from global management consultancy Baringa has pointed to a looming regulatory hurdle for 98% of Australian businesses in the form of proposed mandatory climate disclosures expected to be implemented in 2025.
The company’s research has revealed that just 2% of companies within Australia’s financial ecosystem are prepared to provide the disclosures necessary under proposed amendments to the ASIC Act and Corporations Act.
These changes will require large businesses and financial institutions to disclose how they are quantifying and integrating climate change considerations through their business.
Sending a message
"The Treasury is certainly sending a clear message to Australia's chief financial officers and chief revenue officers," Brainga Australia partner Chris Nott said.
"Our analysis shows that while many firms are disclosing widely, they're not disclosing deeply.
"The better prepared companies are focusing their efforts on the credibility of their disclosures rather than simply just trying to clear the compliance hurdle.
"These new standards are beginning to drive a fundamental change in financial reporting and are raising the bar for company directors and executives now accountable for the accuracy and credibility of these disclosures.”
Baringa looked at more than 100 companies, including some of those on the ASX200, as well as large unlisted companies and large funds.
Its research found there is a low industry-wide capability to assess financial impacts under these new disclosures, and – unsurprisingly – unlisted financial institutions were well behind the curve.
Insurers are also struggling with climate transition metrics and transition planning for these institutions is uncommon.
The bigger banks stood out as having a good baseline to assess climate and financial impacts but fell down in terms of physical risk exposures, while smaller banks lacked detail in their assessments across the board.