Australia’s climate-related financial disclosure should align as much as possible with global standards, the Insurance Council of Australia (ICA) says in a submission on draft legislation.

“Given the substantial size of the Australian market and its relatively high global integration, such consistency is crucial for disclosing entities operating across multiple jurisdictions,” ICA says. 

The proposed legislation introduces a financial-year sustainability report that companies will need to prepare in addition to financial statements, addressing potential risks from climate change.

ICA’s submission says large Australian subsidiaries should have the flexibility to rely on their overseas parents’ climate financial risk reports, rather than needing a bespoke report, while local businesses with significant operations overseas should be able to align reporting with global requirements.

“This will help ease administrative burdens on these entities, help contribute to an overall improvement in the quality of reporting and support Treasury’s objective of internationally aligned climate reporting.” 

Climate disclosures will also be subject to the same sort of assurance rules as financial reports, but transitional arrangements will modify liabilities and offences while systems are bedded down.

ICA says it should be made clear that the modified liability will be provided for disclosures of all climate-related forward-looking statements, and that enough time is needed between the release of the final standard and legislation and the start of reporting for companies to prepare.

“It is not feasible to expect entities to commence data collection and reporting simultaneously with the publication of the standard and legislation,” it says.

The phase-in timetable will see larger companies required to meet the new rules before smaller ones.

The draft legislation explanatory material says climate change is recognised internationally as presenting material risks to the global financial system. “Improving climate-related financial disclosures will support regulators to assess and manage systemic risks to the financial system as a result of climate change and efforts taken to mitigate its effects,” it says.

ICA’s submission is available here.