Submission on the draft Sustainable Finance Strategy

The AICD welcomed the draft Sustainable Finance Strategy as an important piece of the decarbonisation puzzle which, until now, had been missing. We reiterated that the implementation of a mandatory climate reporting regime that incentivises the making of high quality, comparative and useful climate disclosures is central to the Strategy.

Our key points were:

• We support the Strategy’s “climate-first” approach, noting that organisations and boards are grappling with the significant upskilling required to meet mandatory climate reporting. However, we agree that sustainability frameworks should be suitably flexible to allow for reporting on other sustainability issues.
• The existing regulatory framework, including directors’ duties and laws relating to greenwashing, is adequate to address sustainability issues. Rather than imposing additional legal obligations, greenwashing is best addressed through access to high quality sustainability information (which the mandatory climate reporting framework is doing), by clarifying ambiguous areas of the law, and by regulators and standard setters enforcing clear expectations of business. There also should be a concerted Government focus to address competition law concerns to allow organisations to collaborate on decarbonisation initiatives without undue fear.
• The Government needs a specific strategy to attract and increase the supply of experts with the capacity to implement the Sustainable Finance Strategy.
• Data gaps and challenges exist in respect of emissions data and climate impact data. The Government has a leading role to play in resolving these issues. Key steps could include: mapping existing data sources and identifying gaps, facilitating data sharing, enabling whole-of-economy access to centralised data, standardising inconsistent industry classifications, and providing guidance to assist companies identify, measure, calculate and disclose key metrics.
• To improve business certainty and curb greenwashing, ASIC needs to clearly set out its expectations of corporations and its supervisory and enforcement approach.
• AICD broadly supports the proposed introduction of a sustainable financial product labelling regime and consultations into ESG ratings and reforming investor stewardship.
• To position Australia as a regional and global sustainability leader, the Strategy must work alongside broader climate and economic policies aimed at achieving Australia’s climate goals. We also recommend that the Government clarify the role of existing public sector bodies with climate and sustainability mandates.