Harmonising state and territory fundraising laws is high on the AICD agenda, writes Louise Petschler GAICD. Also, updates on climate guidance and proxy advisers.
As one of our regulatory reset priorities, the AICD continues to advocate for a consistent approach to fundraising laws to ensure red tape is not an obstacle to fundraising. In this regard, the AICD has worked with the #FixFundraising coalition on this reform for several years. We support a model that provides a simple single national point of registration, notification, regulation, audit and reporting for charitable fundraisers.
In late May, the #FixFundraising coalition released the Charities Crisis Cabinet Fundraising Survey 2021, which highlighted the barrier Australian charities and not-for-profits (NFPs) face when forced to spend millions of dollars trying to comply with a complex system of fundraising regulations.
Surveying more than 600 charities and NFP organisations, the report revealed:
- 57–88 per cent of charities and NFPs report that the fundraising registration process is either very complex with a lot of information required, or somewhat complex.
- 53 per cent of Australian charities and NFPs consider the impact of current fundraising rules and registration processes as “significant”.
- 22–40 per cent of Australian charities and NFPs report current fundraising rules and requirements cause a high and unacceptable level of financial and human resource burden. This trend appears across all states and territories.
Almost all Australian charities and NFPs (91 per cent) believe it is very important or somewhat important for state and territory governments to create a single national regulation scheme for charitable fundraising — as recommended by the Royal Commission into National Natural Disaster Arrangements. Read the full report here.
These survey results follow a paper released last year by the Intergovernmental Charitable Fundraising National Working Group which discussed simplifying charitable fundraising laws, which the Commonwealth strongly supports.
In our view, simplifying charitable fundraising laws, as suggested in the discussion paper, is a straightforward and cost-neutral way that Australian governments can assist charities to improve their funding position. Reform should be regarded as an urgent economic reform in response to the COVID-19 pandemic and given priority by state and territory governments.
Further momentum for reform emerged in December 2020 when the Treasurer announced that the Council on Federal Financial Relations (CFFR) agreed to establish a cross-border recognition model to harmonise charitable fundraising laws. The intention is that the model will provide a single registration point for national operators, which will reduce costs and administrative burdens for charitable fundraisers that operate across multiple jurisdictions.
We understand that states and territories are working to implement the model in their jurisdictions and that the Commonwealth is committed to supporting their efforts to harmonise charitable fundraising laws. However, as at the date of writing, draft legislation has not been introduced to implement the changes.
The AICD continues to work with the #FixFundraising coalition and is currently considering next steps in our campaign to ensure states and territories implement harmonised fundraising laws.
AICD Regulatory reset priorities
The AICD wants fair, fit-for-purpose and modern regulations that support diligent directors in governing for growth. Our current reform priorities include
- Modernised corporate laws enabling virtual meetings and communications.
- Better-balanced director liability settings, supporting diligent directors to govern for growth.
- Reduced risk of opportunistic securities class actions.
- NFP funding reform and certainty, including fundraising reform.
Proxy advisers update
The federal government is now considering submissions received during the consultation period (which closed 4 June) on reforms promoting greater transparency of proxy advice — an issue that has been contentiously debated in the media over recent months.
As mentioned in the previous edition of this magazine, the AICD acknowledges that proxy advisers have an important function in financial markets, supporting voting of holdings in listed entities with their research and analysis. And for this reason, it is critical their voting recommendations be founded on accurate, considered and objective research.
In its submission, the AICD outlined three key concerns it hopes the reforms will address. Firstly, clear standards of engagement with issuers so that investors can be confident proxy advice is well informed. Secondly, timeframes to allow listed companies to raise any errors and respond to proxy voting advice with enough time to inform the market. Thirdly, clear accountabilities for the management of conflicts of interest so there are standards of transparency and conflict management — as with any other financial market participant — and penalties for breaches.
For clarity, the AICD believes the essential right of shareholders to cast their vote on resolutions as they see fit is undiminished through these proposals; rather, that these reforms are a matter of process and transparency to underpin the quality of the advice. We look forward to seeing the results of the consultation.
APRA climate guidance
The Australian Prudential Regulation Authority (APRA) has released a draft copy of a Prudential Practice Guide for Climate Change Financial Risks.
The guide leans heavily on the Task Force on Climate-related Financial Disclosures (TCFD) framework and identifies prudential practice in the area of governance, risk management, scenario analysis and disclosure. Boards and APRA-regulated entities will be expected to increase their focus and play a key role in superintending climate governance at APRA regulated entities.
Importantly, APRA expects all entities will need to undertake scenario analysis, looking at possible outcomes depending on changes in temperature and new domestic and international regulations. This is work that will be familiar to banks and insurance companies, however, it is somewhat novel for superannuation funds.
The changes may have a broad impact outside the financial sector. APRA-regulated entities will be required to better understand the risk and opportunities they are exposed to via their lending practices, investments and insurance arrangements. This will mean they need to take a closer interest in the work of their clients, borrowers and investee companies. It won’t be just listed companies affected, unlisted companies that are borrowers or receive direct investment will also be challenged on their strategy. It means that questions around climate governance will increasingly cascade down from the financial sector through the boardrooms and executive suites of Australian companies.
It is one of the many reasons the AICD is focusing on climate governance and providing assistance to directors navigating these complex questions. The AICD looks forward to publishing guidance in this area soon.
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