Australian companies will have to disclose climate change-related risks to investors under an “ambitious” sustainable finance agenda being planned in Canberra.
Treasurer Jim Chalmers will use a speech to the Australian Sustainable Finance Institute on Monday to outline the Albanese government’s strategy.
The agenda will make sweeping reforms, including tackling so-called greenwashing in financial markets and introducing the new disclosure requirements.
“It’s our view that once developed, these disclosure requirements will start with the largest entities – most of which are already disclosing voluntarily and are well placed to lead the way,” the Treasurer will say.
“And our initial view is that mandatory reporting requirements should be phased in over time – both in terms of entities covered and the reporting that is required.”
Mr Chalmers will also flag that a regulator will be tasked with providing long-term governance for these standards, though whether this is a new body or an existing one remains to be seen.
Mr Chalmers will say more than half of all ASX 200-listed companies provided some form of disclosure in the last financial year and about 70 per cent of these companies are now covered by a net zero greenhouse gas emissions agreement.
Treasury has been tasked with leading the development of the overall strategy and is due to provide recommendations to the federal government next year.
Mr Chalmers said the Albanese government would consult with public services, the financial regulators and industry.
The Australian climate risk disclosure framework will be a key element of the agenda, following the introduction of similar policies in the US and Europe.
The disclosure requirements would force businesses and parts of the public sector to disclose whether their activities are environmentally sustainable.
The federal government says it expects the reporting requirements to be mandatory for large entities and phased in over time.
The government says it also “intends” to apply “appropriately tailored requirements” to comparable Commonwealth public sector corporate entities and investment funds.
The companies and public sector entities that will be included are yet to be revealed, but more details are expected next year once Treasury reports back with a draft strategy.
Mr Chalmers last week wrote to the nation’s financial watchdogs asking them for their support in implementing the overall strategy and the climate disclosure rules.
In his letter to the Council of Financial Regulators — which is made up of the heads of APRA, ASIC, the Reserve Bank and the Treasury Secretary — Mr Chalmers also asked the agencies for their help in developing a sustainable finance taxonomy.
This taxonomy is expected to act as a classification system so that investors and the government can more easily determine economic activities that are environmentally sustainable.