A Senate inquiry into greenwashing and looming Treasury requirements for climate related financial reporting are building momentum for businesses to take the issues seriously, a legal expert warns. 

Hicksons Lawyers Partner Persia Navidi says the writing is on the wall for businesses to address climate reporting. It will have implications for insurers and associated businesses as they assess and mitigate client risk. 

Ms Navidi will speak on ESG and Financial Claims in Australia at the World Insurance Congress Australia to be staged in Melbourne from tomorrow (Tuesday August 29). 

Earlier this month, the Senate inquiry into greenwashing was granted an extension to report by June, 2024 instead of this December. The inquiry is looking into claims made by companies, the impact of these claims on consumers, regulatory examples, advertising standards, and legislative options to protect consumers 

The Treasury has had two rounds of consultation which could see the introduction of the international standards of reporting. 

The International Sustainability Standards Board (ISSB) came out of COP26 in Glasgow and is developing standards that will result in quality, comprehensive sustainability disclosures focused on the needs of investors and the financial markets. 

“The new ISSB global framework (should it be introduced into law in Australia), would be Australia’s first introduction of a legal framework laying out a standard way of measuring and reporting climate related financial risks,” she said. 

Ms Navidi said there was no single standard of reporting and companies can use any set of standards they chose. 

This makes assessing risk difficult for insurers. 

“The new standards would simplify the work of major insurers and brokers, who will be able to analyse and identify risk in a more uniform way with qualitative information across their corporate clients,” she said. 

Ms Navidi said businesses should be improving the measurement and disclosure of climate-related risks now rather than waiting. 

“Those organisations who are already disclosing under the Task Force on Climate Related Financial Disclosures (TCFD) or other frameworks shouldn’t be too surprised by the ISSB standards, which are built on the TCFD framework,” she said. 

In May ASIC published details of 35 interventions it has made in response to its greenwashing surveillance activities from July 2022 to March 2023. The report also pointed to the increasing levels of representations on environmental, social and governance credentials by listed companies, managed funds and superannuation funds. 

“The new requirements are coming at a good time for insurers, and ultimately for business leaders. With an increasingly harsh spotlight on greenwashing, as evidenced by ASIC’s recent announcements that the regulator is commencing proceedings against Vanguard Investments and ActiveSuper, there is growing unease amongst insurers and their corporate clients about more Australian companies being targeted by regulators – and subsequently investors, and potentially class actions/litigation funders,” she said. 

“This example highlights that a far greater level of rigour and focus on ESG claims will be required when the new disclosure requirements take effect.”