Chapter 2Views on the bill
2.1This chapter examines stakeholder views on the provisions of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill2024. It is informed by the bill’s explanatory materials, submissions received by the inquiry, evidence provided at the public hearing on 23 April 2024 and additional material submitted to the committee.
2.2As there are two distinct parts to the bill, the analysis in this chapter initially considers the Financial Market Infrastructure (FMI) crisis management reforms before exploring the climate-related reporting regime. It concludes with the committee’s views and a recommendation.
FMI crisis management reforms
2.3There was a high degree of support for the FMI crisis management reforms introduced in the bill from those stakeholders who offered their views on this issue.
2.4For example, Ms Diane Lewis from the Australian Stock Exchange (ASX), which operates the main clearing and settlement facilities underpinning the Australian financial system, considered that the reforms would provide certainty to the market and:
…that, in times of crisis, the regulatory agencies have the appropriate tools and legislative powers to ensure that the continuation of clearing and settlement services are provided throughout that crisis and to shore up the continued operation of the financial system.
2.5The Australian Securities and Investments Commission (ASIC) commented that it had worked closely with the RBA and Treasury in the development of the legislation and felt that the reforms struck an appropriate balance between stakeholders and the broader Australian market. Further, Ms Calissa Aldridge from ASIC argued that the new powers afforded by the reforms:
…will enable us to proactively be in a better position to monitor and identify risks and ensure that we're applying tools that are fit for purpose in the context of a whole range of financial market infrastructure, not just clearing and settlement facility providers.
2.6The Reserve Bank of Australia (RBA) echoed these remarks:
The proposed new crisis powers will be an important addition to the regulatory toolkit. They will greatly improve the RBA’s ability to respond effectively to a threat to the viability of a CS [clearing and settlement] facility, which could otherwise pose risks to the stability of the Australian financial system. The interconnected nature of CS facilities and their central role in the modern financial system means that the disorderly failure of one of these entities would likely lead to disruption to the wider financial system. Such a failure could result in the unwinding of payments, a delay or failure of settlement of transactions and/or a disruption to asset markets as large amounts of margin collateral is liquidated.
2.7The RBA also noted that, although some of powers contained in the bill are stronger powers than those typical of regulators, this is proportionate as these powers are only meant to be used in response to serious threats to the financial system. The RBA was supportive of the changes to the test to determine if a CS facility is required to be licensed in Australia and considered that this will provide more certainty to CS facilities and regulators.
2.8The Treasury and the ASX noted that the FMI reforms will bring Australia into alignment with similar G20 nations and are consistent with international best practice. Ms Khanh Hoang, Assistant Secretary at Treasury, noted that:
The bill implements the 2020 recommendation of the Council of Financial Regulators that the government reform Australia's financial market infrastructure regulatory regime. It lines up with the G20 and the IMF, and follows post GFC global best practice. Similar regimes exist in the US, Canada and the UK.
2.9The ASX commented that the bill as introduced into the Parliament has taken feedback from the Treasury consultations into account.
2.10Mr Ellis Connolly, Head of the RBA Payments Policy Department, indicated that the RBA plans to put in place resolvability standards and additional guidelines to provide supervised entities with further information regarding the new powers.
2.11In the context of related recent reforms to competition in clearing and settlement activities, Ms Alridge indicated that ASIC intended to take a ‘holistic and very thoughtful approach’ to developing guidance associated with both reforms, including in relation to fit and proper rule making and how ASIC proposes to use these powers.
2.12Indeed, Treasury outlined its expectation that the regulators, the RBA and ASIC, would work closely with industry and provide guidance in a timely manner that provides confidence to market participants.
Climate-related reporting regime
Broad support
2.13Evidence received by the committee illustrated broad support for the climate-related reporting regime that is to be introduced by the bill.
2.14In their joint submission, Chartered Accountants Australia and New Zealand and CPA Australia (CAANZ and CPA Australia) were supportive of the regime:
Internationally aligned and credible climate-related financial disclosures will be pivotal to maintain Australia's position within the global economy, particularly for those larger and public interest entities in Groups 1 and 2 whose stakeholders are increasingly demanding climate disclosures.
2.15The ASX commented that the successful implementation of a climate-reporting regime would be important for Australia’s position in the global financial landscape and its attractiveness as a destination for global capital. The ASX stated that it was supportive of the introduction of such a regime that aligns with International Sustainability Standards Board (ISSB) standards in Australia.
2.16The Australian Council of Trade Unions (ACTU) took a similar view:
Mandatory disclosures against robust standards and a sustainable finance taxonomy will improve the ability for governments, regulators, investors, and the public to make informed decisions, encourage the management of climate-related risks and encourage the transition to a renewable energy economy.
2.17This point was also emphasised by the Investor Group on Climate Change, who noted that mandatory sustainability reporting will ‘help Australia remain a competitive destination for investment capital’. They stated that such reporting could:
enable superannuation funds and investment managers to prudently manage the climate-related risks and opportunities affecting the retirement savings of Australians;
support efficient investment in companies and projects aligned with net zero emissions;
help Australian companies stay attractive in global capital markets;
help investors, regulators, and other stakeholders form a comprehensive, reliable understanding of the economy’s overall climate risks and opportunities;
avoid market fragmentation and reduce the reporting burden for companies that need to disclose into multiple jurisdictions; and
help protect against greenwashing.
2.18The Carbon Market Institute (CMI) underlined that climate reporting would work alongside market-based mechanisms to help guide investment decisions which would support Australia’s climate targets and the goals of the Paris Agreement.
2.19The modified liability regime for forward-looking climate statements in the sustainability report was welcomed by the Insurance Council of Australia (ICA):
Under the proposed mandatory climate disclosure scheme, there are many types of forward-looking statements that require estimation of impacts of risks and opportunities which are inherently uncertain and may be deemed misleading or deceptive under the existing regulatory framework, specifically the misleading and deceptive conduct regime, for example s.769C of the Australian Corporations Act, s12BB of the ASIC Act 2001 and s.4 of the Australian Consumer Law.
2.20The Australian Institute of Company Directors (AICD) went further, underlining that the modified liability regime must remain in its current form in the bill, stating:
Many forward-looking disclosures required under the Sustainability Standards suffer from a high degree of measurement and outcome uncertainty and are highly novel in the Australian market.
2.21Another aspect of the legislation that was welcomed by participants in the inquiry was the phased-in approach for mandatory reporting. The Australian Council of Superannuation Investors (ACSI) made the point that although larger listed companies were well placed for the incoming regime, less mature market participants may require more time to adjust to their new reporting requirements.
2.22ASIC highlighted the scale of the changes made by the bill and noted that industry will require significant capacity building in order to meet these changes. They welcomed the bill’s phased approach to implementation and commented that ASIC was developing regulatory resources and would work with affected entities to assist with the change.
2.23Going further in their submission, the ACSI also strongly supported ‘the inclusion of an assets under management test to support consistent and effective application of the reporting requirements to registrable superannuation entities’.
2.24The ICA also expressed support for the phased-in approach for reporting on Scope 3 emissions and recommended that this regime could be further improved by benchmarking Scope 3 reporting to the development of better methodologies and data sharing arrangements as they matured across industry.
2.25The thorough consultation process undertaken by Treasury was welcomed by many of the submitters to the inquiry. The Internet of Things Alliances Australia stated that the Treasury consultation process had resulted in reasonable modifications to the proposed legislation, particularly changes around the phased in approach for reporting requirements dependent on the size of the entity.
2.26The Financial Services Council (FSC) echoed this sentiment and appreciated the collaborative approach taken by Treasury and the Government in engaging with their industry. In particular, the FSC listed the introduction of a modified liability regime and the improved clarity of the applicability of the regime for registered schemes and registrable superannuation entities as positive outcomes of the consultation.
2.27CAANZ and CPA Australia were also complimentary of the engagement undertaken by Treasury throughout the consultation period of the bill, particularly the engagement with larger entities.
Issues raised by submitters
2.28Although submitters to the inquiry expressed broad support for the concept of a mandatory climate-reporting regime, several submitters and witnesses at the public hearing expressed concerns about aspects of the bill.
Commencement date of the reforms
2.29Various submissions highlighted the delay in the commencement date of mandatory reporting for Group 1 entities from 1July2024 to 1 January 2025.
2.30For example, the Environmental Defenders Office (EDO) held the view that any delay in the commencement date would cause Australia to fall further behind other jurisdictions that had already implemented similar reporting regimes and would compound the climate-related risks to the financial system.
2.31The EDO also made the point that many of Australia’s largest entities have already adopted voluntary climate disclosure frameworks, which have also informed the drafting of the bill, and considered that, given this familiarity, there should be no reason to further delay the reporting regime.
2.32This view was echoed by the Australian Conservation Foundation (ACF), which also pointed out that consultation for the climate reporting regime had been ongoing since December 2022 and affected entities had had sufficient time to prepare.
2.33This view was not shared by all stakeholders. For example, the AICD was supportive of the delayed commencement date of the regime from 1 July 2024 to 1 January 2025, as this would allow for the Australian Accounting Standards Board (AASB) and the Auditing and Assurance Standards Board (AUASB) to finalise the sustainability standards and sustainability audit standards respectively.
2.34The ASX expressed that the 1January 2025 commencement date was ambitious and considered that there should be a 12-month gap between the finalisation of the AASB’s climate disclosure standards and the commencement of the first reporting period. The ASX noted that the AASB’s consultation process on the sustainability reporting standards had only closed on 1 March 2024, saying further:
Rushed implementation would not only negatively impact reporting entities, investors and efficient capital allocation, but may undermine the credibility of the regime and jeopardise Australia's attractiveness as an investment destination for global capital.
2.35Treasury representatives noted that the standards are not anticipated to be finalised by the AASB until August 2024, which the committee notes is less than six months before the proposed starting date of 1 January 2025.
Three-year modified liability
2.36Another common theme in submissions was the inclusion in the bill of a three-year modified liability period for reporting entities, which would prevent third parties from making claims about misleading statements in transition plans. As mentioned above, several submitters to the inquiry were highly supportive of the inclusion of this in the bill. However, other submitters expressed reservations about its inclusion.
2.37The EDO noted that the modified liability regime was a significant departure both from proposals in the Exposure Draft (which did not prevent third parties from bringing claims, including for misleading and deceptive disclosures) and from the general application of misleading and deceptive conduct provisions in the Corporations Act, the ASIC Act or the Australian Consumer Law. It stated that the proposal in the bill was a ‘regressive step that removes important accountability mechanisms’.
2.38The CMI took a more measured view, stating that it appreciated the need to balance disclosing important information with protections for reporting entities, but also highlighting that similar protections were not established in other jurisdictions when they introduced similar regimes. It recommended that the modified liability provisions be amended to reduce their scope and duration.
2.39Other submitters cautioned that the modified liability provisions could lead to ‘widespread greenwashing’ through the first three years of the regime. Concerns were also raised that these provisions undermine the benefits of transparency that the climate reporting scheme sought to achieve, and the modified liability regime does not provide a critical enforcement mechanism to ensure accountability.
2.40Conversely, various submitters advocated for an expansion of the modified liability regime, saying it should be expanded to apply to protected statements made outside of the sustainability report or the audit report and also include disclosures such as website statements and investor briefings to encourage broader engagement with climate issues.
2.41Expanding on this, the AICD remarked that removing or reducing the modified liability regime could undermine the aims of mandatory climate reporting as organisations, concerned by the prospect of litigation, may make more generalised climate disclosures, which would be of limited use to investors.
2.42Herbert Smith Freehills argued that the scope of the modified liability protections should be expanded to all substantively protected statements, writing in their submission:
As drafted, the modified liability regime could prevent entities from communicating effectively with stakeholders about their Scope 3 emissions, scenario analysis and transition plans, risk distorting market information flows and create legal risks when entities are discussing their climate strategies in different forums (which is typical practice and expected by external stakeholders).
2.43The Governance Institute of Australia (GIA) acknowledged that the modified liability regime had addressed some of its members’ concerns around the bill but echoed the calls for expanding these protections. They also recommended that limited immunity be expanded to all entities coming into the climate reporting scheme for the first three years of its existence.
2.44Equity Generation Lawyers took the view that modified liability provisions should be limited to proceedings for misleading or deceptive conduct that seek loss or damage. In order to combat greenwashing, they recommended that public interest private litigation for misleading or deceptive conduct should be permitted if it does not seek losses or damages.
2.45In its submission, the Law Council of Australia (LCA) made the comment that it had received a range of views from stakeholders regarding the modified liability provisions and had come to the view that it supported their inclusion, noting the policy objectives of the reform as well as the need for a transitional period for affected entities. The LCA went on to say:
While private litigation is an important accountability mechanism for corporate disclosures, the Law Council considers it preferable that compliance is promoted in the early years of the regime through education and redirection by the regulator. Reserving legal action for ASIC over the transitional period has the added advantage of utilising less expensive and/or time-consuming compliance and enforcement tools prior to considering legal proceedings…whereas private litigation can be a more blunt compliance tool by comparison. The threat of private litigation may also result in conservative, bare minimum disclosures by reporting entities out of fear of getting it wrong in the early years of the regime.
2.46Treasury acknowledged that there were differing views on the inclusion of the modified liability requirements and provided its reasoning for these provisions:
The liability modifications that have been included support entities to develop confidence around the most uncertain elements of their reporting obligations before they are fully accountable to private litigants, while ensuring that they can’t escape accountability entirely because ASIC will be ensuring that reporting is appropriate.
Auditing requirements
2.47A variety of concerns were raised in submissions about the auditing requirements for sustainability reports introduced by the bill.
2.48Some submissions remarked that the starting date for the enduring provisions of the mandatory auditing requirements of 1July 2030 will not achieve the policy goals of providing investment transparency and certainty for investors and companies. For example, Equity Generation Lawyers recommended that the enduring provisions for the mandatory auditing requirements commence from 1January 2026.
2.49The LCA took a similar view, noting that the delay until 2030 did not align with the transitional provisions for directors’ declarations. They recommended that the AUASB auditing standards be brought forward to 1 January 2027, to apply for the 2027‑28 financial year.
2.50GHD raised concerns about the cost and whether there will be a positive cost benefit for auditing on these kinds of disclosures, while also commenting on capability gaps for financial auditors in Australia having to now perform climate audits. GHD suggested that Australia could follow the EU’s example in creating a separate accreditation for sustainability or climate auditors.
2.51GHD also suggested that the AASB and the AUASB undertake periodic reviews of any standards regarding sustainability reporting to ensure they meet global standards. Alternatively, GHD considered that the 2028 review of the scheme mandated by the bill could be amended to include sustainability and auditing standards.
Requirement for audit reporting for Group 3 companies
2.52Several submissions commented on the requirement that all Group 3 entities undertake an audit if they have no material climate risks or opportunities.
2.53CAANZ and CPA Australia noted in their joint submission that it is anticipated that Group 3 will be made up of 7098 entities, most of which will likely be not-for-profits or smaller private companies. They estimated that the audit or ‘reasonable assurance engagement’ would be a substantial process that would likely cost between $20000 and $50000 for the entities involved.
2.54Aside from this, CAANZ and CPA Australia also noted that there may be limited skills and capacity for audit firms to serve the Group 3 cohort of companies. This would lead to increased pressure on small and medium practice auditors, which would in turn lead to a decrease in audit quality. They cautioned that ‘a significant pressure on the quality of auditing arises in situations where audits are used as an alternative to more appropriate and focused scoping of the entities impacted at a policy/legislative level’.
2.55CAANZ and CPA Australia suggested that the threshold for Group 3 entities be increased to $100 million in consolidated revenue with an additional qualifier limiting this group to Public Interest Entities or Disclosing Entities. Alternatively, they suggested removing the audit requirement entirely for Group 3 entities or limiting the audit requirement to Public Interest Entities or Disclosing Entities.
2.56Nexia Australia highlighted concerns regarding the mandatory auditing requirements in the bill:
…we are concerned that the auditor will be required to undertake their own analyses, scenario assessments, and business strategy and risk assessment procedures in order to form an opinion as to whether the auditor concurs with the directors' assessment.
2.57Nexia Australia also raised issues about the capacity of small and medium practice auditors to perform audits of sustainability reports, observing that some may choose not to perform these audits for risk management purposes. They noted that the requirement that the same firm audit both the financial report and the sustainability report may also lead to increased concentration of the auditing market in the larger firms and reduce competition in the market.
2.58The AICD highlighted the potentially significant costs of mandatory audits of a statement of no material climate risks or opportunities. They also questioned why not-for-profit entities were not exempted from the auditing requirements alongside charities. They recommended that the audit requirement for Group 3 entities be substituted for a review or similar that would provide external assurance without the expense of a full audit process. Alternatively, they suggested that there could be a narrowing of Group 3 entities, through either raising thresholds or omitting not-for-profits from this grouping.
2.59The AICD went on to make the point that the purpose of climate reporting is primarily to advise potential investors in, or lenders to, for-profit companies, rather than the uses of reporting for smaller and not-for-profit entities.
2.60The GIA also recommended that there should be a reduced reporting regime for Group 3 entities, that the threshold for Group 3 entities be raised to $100 million consolidated revenue, and that not-for-profit entities be excluded from this group.
2.61In response, Treasury representatives highlighted the reduced reporting requirements for Group 3 entities:
You’ll see in the transitional arrangements but also in the ongoing obligations that, for group 3 entities, where they consider they don’t have material financial risks, they’re not required to undertake the complete suite of reporting. They do need to ensure that they are giving due consideration to the risks that they face and ensuring that they have undertaken some form of process to ensure that they themselves are confident and comfortable that they don’t face material financial climate risks, but that, once they’ve done that and received assurance over that, that's the end of their reporting obligations.
2.62Treasury representatives also emphasised the value in promoting consistency by using existing standards and existing definitions to reduce the burden of reporting:
Ultimately, we design these thresholds to try and balance the needs of different stakeholders. We do understand that there are a number of concerns from these smaller entities, but ultimately the trade-offs that needed to be made were appropriately balanced here. That was also a function of the 'large proprietary company’ thresholds having been comprehensively reviewed in 2019 and adjusted at that time and found to be appropriate to the size of the companies and the reporting obligations required.
2.63Following the consistency principle outlined above, Treasury representatives outlined why not-for-profit organisations were not referred to specifically in the legislation:
Again, we didn’t want to create additional complexity or create incentives for businesses to establish or restructure themselves in ways that might enable them to avoid reporting where reporting would otherwise be appropriate. It’s for this same reason that we’ve included unlisted companies as well as listed companies, to again avoid perverse incentives for companies to structure themselves to avoid certain types of reporting. But, obviously, if companies are genuinely not-for-profit companies and are registered with the Charities and Not-for-profits Commission then they will be exempt from reporting, as they are for financial reporting at the moment.
Substituted compliance for local subsidiaries
2.64Various submissions also raised questions about local subsidiaries of global companies, many of which may have parent companies already completing sustainability reports in their home jurisdictions. These stakeholders sought clarity about whether Australian-based local subsidiaries would be required to prepare reports separately from their parent companies.
2.65The Australian Financial Market Association (AFMA) was of the view that Australian-based subsidiaries should be exempt from preparation of a sustainability report under the proposed regime. An exemption would reduce compliance burdens and would encourage disclosure within the corporate group, leading to better sustainability insights for global institutions.
2.66The ICA had similar views, writing that its members would like clarity in this area. They also questioned whether Australian companies with interests outside Australia would be allowed to align their sustainability reporting to global standards.
2.67Herbert Smith Freehills recommended that an Australian subsidiary should be allowed to rely on a parent entity’s sustainability report without needing to produce its own Australian version of the report, arguing this would reduce duplication and costs. Baker McKenzie echoed these views, noting that the Australian climate reporting standards and the reporting standards of other major jurisdictions will be very closely aligned.
Workforce impact and reporting
2.68Some inquiry participants suggested that sustainability reporting should be expanded to include reporting on impacts on the workforce. For example, the ACTU wrote:
Australia’s transition to net zero must provide positive social outcomes for the workers powering the transition, the communities experiencing and enabling it and the workers and communities who support current carbon-intensive industries. Such social benefit should be built in as a fundamental component of the Government’s Sustainable Finance Strategy, including climate-related disclosures, through conditionalities on good quality jobs and fair labour standards and positive social outcomes.
2.69This view was echoed by the Maritime Union of Australia, which recommended that sustainability reporting should include metrics and targets relating to workforce impact. This submission noted that the EU’s sustainability reporting regime includes workforce reporting.
2.70The ACTU also pointed out that the ISSB, in its current stakeholder consultation on its future workplan, is considering proposed projects on, among other things, human rights and human capital. Including similar considerations in the Australian sustainability reporting regime would put Australia at the forefront of best practice and developments on climate disclosure.
The Minister’s discretionary powers
2.71Another matter raised by submitters was the Minister’s discretionary powers in the bill to potentially use delegated legislation to require disclosure of financial matters beyond climate matters, with the AICD claiming these were ‘significant policy matters which are inappropriate for delegated legislation’.
2.72Herbert Smith Freehills expressed concern that, although associated legislative instruments would be subject to disallowance and would sunset after 10 years, there is the potential for the Minister to broaden the regime significantly without due consultative process or fulsome legislative oversight. Accordingly, Herbert Smith Freehills and the GIA both submitted that the Minister’s ability to expand the regime should more expressly require industry consultation.
2.73On this point, Baker McKenzie argued that, after the extensive consultation undertaken for this legislation, any further proposals to amend the reporting requirements should follow a comparable process of policy formation:
The current Bill is the culmination of a lengthy consultation process, attesting to the fact that climate-related disclosure raises significant and complex policy issues.It follows that any proposal to expand the suite of disclosures should be subject to a comparable process of policy formulation, public consultation and legislative scrutiny, and is not an appropriate subject of delegated, Ministerial power.
2.74The LCA highlighted the ambiguity associated with ‘other matters relating to environmental sustainability and the related ministerial power to develop a legislative instrument to require a sustainability report to include environmental sustainability matters’.
It is concerning that no further details are provided in the text of the Bill, nor the Explanatory Memorandum, other than to note that there may be international developments in environmental sustainability in the future.
Scope 3 emissions disclosures
2.75Some stakeholders raised concerns about how Scope 3 emissions disclosures would be undertaken, the potential value of this information and the potential costs associated with gathering the necessary information.
2.76For example, Baker McKenzie cautioned that:
Requirements around scope 3 greenhouse gas emissions need to be carefully reconsidered to ensure that they achieve fairness of outcome, and do not inadvertently penalise the good actors who proactively implement sustainability initiatives, as compared with others who do not.
2.77Mr David Hardidge outlined his views against Scope 3 emissions disclosures:
Scope 3 reporting, that includes activities in the ‘value chain’, i.e. suppliers and customers, is not consistent with usual accounting reporting. Usual accounting reporting involves the reporting entity, or consolidated reporting entity. Consequently, usual accounting reporting does not include results of suppliers or customers that are not controlled.
The costs on business (particularly small business), and government agencies, of Scope 3 reporting advocated by many advisers and consultants would be very significant. Not only would ‘value chain’ suppliers and customers be required to report their Scope 1 and Scope 2 emissions (information they are likely not to collect), but such entities would also be required to report their ‘Scope 3’ emissions. Which, then of course, would force additional costs onto their ‘value chain’ suppliers and customers, and so on and so on.
2.78Indeed, Mr Hardidge considered that ‘Scope 3 emission disclosures should not be required by the legislation as they do not provide useful information’.
2.79In response, Treasury representatives argued that ‘Scope 3 is an important part of any climate-reporting regime’ and that it is ‘quite different to what companies have been doing in the past’.
2.80Treasury representatives also highlighted that including Scope 3 emissions in the reporting regime is important for identifying and understanding the associated financial risks:
…many of the financial risks that investors are trying to manage and that companies need to be aware of in their own activities are really affected by scope 3 emissions…It really is important to understand where emissions sit in company’s supply chains to enable them to really understand what their financial risks might be.
Committee view
Financial Market Infrastructure
2.81The committee notes the overwhelmingly positive support for these reforms and welcomes the Government’s commitment to enact the recommendations from the Council of Financial Regulators to prevent and intervene during a crisis.
2.82As noted by many stakeholders, while it is hoped that these powers will never have to be used, they provide an important level of confidence and ensure the stability of Australia’s financial markets.
2.83The committee is encouraged by commitments from ASIC and the RBA to work collaboratively and constructively with market participants to develop guidance on new aspects of this regulatory regime in a timely manner.
Climate reporting
2.84The committee considers that the introduction of high-quality climate-related financial disclosures will support Australia to continue to attract international capital and is consistent with international standards.
2.85The committee believes that these reforms will guide investors to maximise Australia’s economic opportunities and maintain and grow Australia’s reputation as a destination for international capital that will be needed in the transition to net-zero.
2.86The committee is encouraged by the broad support from stakeholders for the introduction of a regime that is a significant part of the government’s sustainable finance strategy.
2.87The committee looks forward to the release of AASB and AUASB reporting standards and the certainty this will provide. The committee is also encouraged by the level of engagement in the consultation process and expects that this will continue as these standards are reviewed, brought in line with international benchmarks over time, and further developed in other areas such as human rights and human capital.
2.88The committee welcomes the phased-in approach to be taken over the next four years, and expects this approach will provide an appropriate transition period for entities involved in the new reporting regime.
2.89The committee considers the modified liability provisions provide an important transition for entities before they are fully accountable to private litigants, and notes that during this time, ASIC will have oversight to ensure that the climate-related financial reporting is appropriate.
2.90The committee welcomes provisions that address the potential compliance burden on Group 3 companies, particularly where they consider they do not have material financial risks. The committee also emphasises that genuine not-for-profits and registered charities will be exempt from climate reporting, like they are from financial reporting.
2.91The committee believes the Minister’s discretion to use delegated legislation to require the disclosure of additional matters is appropriate to give the Minister flexibility to ensure that Australia can continue to align with international standards as they develop.
2.92The committee appreciates that industry stakeholders and Treasury have reflected positively on the extensive consultation process undertaken prior to the climate-related reporting regime being introduced into the Parliament.
2.93The committee notes significant evidence from inquiry participants that these measures should pass without undue delay.
2.94The committee recommends that the bill be passed.
Senator Jess Walsh
Chair
Labor Senator for Victoria