Climate in Focus newsletter - May 2023

This month, we launch the new Climate Governance Guide for NFP Directors – Starting the Journey to Net Zero, discuss key climate announcements included in last week’s Federal Budget 2023-24, and provide an update on ASIC’s recent greenwashing actions.

Please register here to secure your tickets for the 2023 Climate Governance Forum on Friday 11 August, hosted by the AICD. Following on from the success of the inaugural event in 2022, which saw around 1400 directors and senior leaders attend, this year’s event will be held at the Hilton Sydney and online. It will feature key director, regulator, and stakeholder voices including Xero Chair, David Thodey AO FAICD, on how boards should be getting ready for mandatory climate reporting, Atlassian Co-Founder, Mike Cannon-Brookes discussing the energy transition, and ASIC Deputy Chair, Sarah Court outlining the regulator’s approach to greenwashing.

New climate governance guide for NFP directors

Today, the AICD launched the ‘Climate Governance Guide for NFP directors – Starting the Journey to Net Zero’. In recent years, directors of NFPs have consistently told us that they are concerned about climate change but unsure how to get started against competing priorities and limited resources. The new guide provides a simple roadmap for NFPs seeking to make a difference at a localised level. The guide includes tools and practical examples for how NFPs can take action to address climate change, such as reducing energy consumption or transitioning to renewable energy sources. It also provides an overview of the importance of stakeholder engagement and highlights the risks and opportunities of addressing climate change.

AICD Managing Director and CEO, Mark Rigotti MAICD, said “The AICD is committed to supporting NFPs and their boards on their climate governance journey, and to demystify this important topic.”

Update on ASIC’s greenwashing enforcement approach

On 10 May 2023, ASIC released a report outlining its regulatory interventions into greenwashing made between 1 July 2022 and 31 March 2023. ASIC encouraged issuers and advisers to consider this report and the questions and principles in Information Sheet 271 (How to avoid greenwashing when offering or promoting sustainability-related products), when preparing disclosures.

ASIC highlighted the following results:

• 23 total corrective disclosure outcomes
• 11 infringement notices issued
• 1 civil penalty proceeding commenced

In the managed funds sector, 14 responsible entities amended their disclosures in 21 Product Disclosure Statement (PDSs) and one fund’s name was changed.

In relation to listed companies, 9 entities amended disclosure documents, company websites or market announcements. ASIC provided examples of its regulatory interventions with reference to the following themes:

• Net zero statements and targets
• Use of terms such as ‘carbon neutral’, ‘clean’ or ‘green’
• Fund labels
• Scope and application of investment exclusions and screens

For FY23-24, ASIC advised that it would be progressing its surveillance on the superannuation fund sector and the wholesale green bond market, and will continue its surveillance of the managed fund and corporate sectors. ASIC is continuing to investigate several entities in relation to suspected greenwashing and it anticipates further enforcement action.

To hear more on ASIC’s greenwashing approach, register for the Climate Governance Forum where ASIC Deputy Chair, Sarah Court, will outline the regulator’s enforcement approach. In the meantime, check out our recorded webinar (in collaboration with CGI Australia partner, MinterEllison) on greenwashing for practical steps for how boards can reduce legal and reputational exposures.

Federal Budget 2023-24 climate announcements

The Government has ambitions for Australia to be a “renewable energy superpower”, committing over $40bn in the Budget. This week, Climate Change and Energy Minister, the Hon Chris Bowen MP, added in a speech to the Committee for Economic Development of Australia (CEDA) “Australia has more to lose from climate change than any other developed country and more to gain from our renewable potential.”

$23bn is allocated to improve the electricity grid and support electrification, and $17bn to exploit opportunities in hydrogen, critical minerals and upstream industries including a $2bn “Hydrogen Headstart” program.

The Budget includes funding for the recently announced Net Zero Authority, tasked with promoting an orderly transition to a clean energy economy. The Authority will focus on the regions, industries and workers that have traditionally powered Australia’s economy while enabling First Nations Australians to participate meaningfully. Similar authorities are already in operation in other jurisdictions, such as Scotland’s Just Transition Commission, aimed at better consultation and engagement with impacted stakeholders.

The Government has also provided $14.2m for a sustainable finance strategy which will include the introduction of a sovereign green bond program to raise capital for environmental and climate change programs, developing a sustainable finance taxonomy, and addressing greenwashing and related misconduct through dedicated ASIC surveillance and enforcement funding ($4.3m in FY24).

The Budget also included a re-commitment to mandatory climate related financial disclosures for large businesses and financial institutions, while providing dedicated funding of $18.1m to strengthen the integrity of Australian Carbon Credit Units.

The Government will also provide $214.1 million over 4 years to deliver the Nature Positive Plan, which includes $7.7 million to continue developing the foundations of a Nature Repair Market. 

Mandatory climate reporting is a key focus for Australian boards and directors. Refer to our recently launched primer, Gearing up for mandatory climate reporting: What directors need to know, and recent free webinar for further information.

Other climate governance news

• “Australia 2023 – Energy Policy Review” (International Energy Agency) – Since the IEA’s last review in 2018, Australia has significantly raised its climate ambitions, with the 2022 Climate Change Act doubling the target for emissions reductions by 2030 and setting the goal of reaching net zero emissions by 2050. The IEA review calls for an updated net zero emissions reduction plan for 2050 to guide implementation across all of government, including a national energy and climate information system to track progress towards reaching these targets.
• “Woodside digs in amid investor protest vote over climate strategy” (SMH) – Former federal resources minister Ian Macfarlane, a board member for six years, had 35 per cent of shareholders vote against his re-election after he was targeted by investors and proxy advisers dissatisfied with Woodside’s plans to cut emissions. Prior to the AGM, Chairman Richard Goyder AO agreed that Woodside’s climate strategy, which 49 per cent of shareholders rejected last year, would be put to a non-binding vote in 2024 and every three years after. At the AGM, Woodside also agreed to formally meet with Greenpeace.
• “Parliament backs new rules for sustainable, durable products and no greenwashing” (European Parliament) – On 11 May 2023, the European Parliament backed draft legislation  banning the use of general environmental claims like “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco” if these do not come with detailed evidence. It also aims to ban environmental claims that are based solely on carbon offsetting schemes. Next steps will be to negotiate with Member States on final content and wording of the directive.