This month, the Australian Government released its highly anticipated mandatory climate reporting exposure draft legislation for consultation. The exposure draft is largely consistent with Treasury’s June 2023 proposal and could require the largest corporations and emitters to commence reporting from as early as 1 July 2024. Importantly, the exposure draft retains a three-year regulator-only enforcement period for scope 3 and certain forward-looking climate representations such as scenario analysis – a relief mechanism for which the AICD has been a leading advocate.
Also in this newsletter:
- Six trends expected to influence climate governance priorities this year
- Scientists officially declare 2023 the warmest year on record
- Australia’s renewable energy transition challenge and other recent market developments
- Top climate governance resources to help you prepare for 2024.
The Australian government issued its final position and legislation on mandatory climate reporting on 12 January. The exposure draft is largely in accordance with Treasury’s June 2023 Proposal, with some technical amendments. Implementation will involve a three-tiered phased-in approach for organisations in size-based cohorts. It is proposed that Australia’s largest emitters, financial institutions, and companies (roughly equivalent to the ASX 200) begin disclosing against International Sustainability Standards Board (ISSB)-aligned standards as early as 1 July 2024 – though government is seeking views on whether this should be deferred to 1 January 2025.
In 2024, the climate governance landscape will undergo a significant change as countries, including Australia, implement mandatory climate reporting schemes. Board focus on climate and related governance issues is expected to step up with heightened regulatory, investor and activist scrutiny of corporate environmental claims and a renewed urgency for climate adaptation investment. This will require extensive collaboration within organisations (particularly between the sustainability and finance teams), sectors, and across the economy. Read our article on six trends to follow in 2024.
Scientists officially declare 2023 as the hottest year on record
The European Union's Copernicus Climate Change Service (C3S) declared 2023 as the hottest year on record globally, and likely the warmest in the past 100,000 years. In its Global Climate Highlights 2023 report, C3S found the global average temperature was 1.48°C higher than the average for the period 1850-1900, when records began. Despite global efforts to curb emissions, carbon-dioxide levels in the atmosphere have reached a record high. Last year saw the first instance of every day being more than 1°C hotter than pre-industrial times, with almost half of the days exceeding the Paris Agreement threshold of 1.5°C. The consequences are confronting. In the past decade, heat-related deaths for the over 65 years population have climbed by 47 per cent, according to the Lancet.
In Australia, east coast states faced severe storms and floods, prompting a 'catastrophe declaration' by the Australian insurance industry over the new year period. ASIC Chair Joe Longo told the AFR that Australia faced an emerging insurance crisis as extreme weather made an increasing number of properties uninsurable and drove premiums higher.
Get ready for 2024 with these climate governance resources
- Introduction to climate governance e-Learning module: Join thousands of AICD members who have registered for our self-paced e-learning module on climate governance. Pitched at an introductory level, this online module covers climate fundamentals, risks, directors' duties, regulations and implementation planning, in a flexible and accessible format. A more comprehensive AICD live course will also launch soon.
- A director’s guide to mandatory climate reporting: This CGI Australia resource, co-authored by AICD, Deloitte and MinterEllison, provides detailed and practical guidance for directors to prepare their organisations for mandatory climate reporting. It includes an overview of the proposed Australian mandatory reporting framework and key legal obligations for directors. Please note that the guide is currently being updated to reflect the release of the Government’s exposure draft legislation for mandatory climate reporting and related policy developments.
- Climate change science snapshot for boards: Stay informed with the Climate Change Science Snapshot 2023, prepared with Australia’s leading science body, the CSIRO. This resource provides directors with straightforward information on fundamental climate concepts, the current state, and the outlook of climate change globally and in Australia.
- Climate Governance for NFP Directors: To assist NFP directors with climate change governance, this guide provides a simple roadmap for not for profits seeking to make a difference at a local level. It includes tools and specific examples to take action to address climate change, such as reducing energy consumption or transitioning to renewable energy sources.
Market developments update
National Electricity Market roadmap highlights renewable energy project delays
The Australian Energy Market Operator (AEMO) released the Draft 2024 Integrated System Plan (ISP) in December. AEMO releases an ISP every two years, and it is considered a roadmap for the National Electricity Market's (NEM) transition. Under its ‘Step Change’ scenario – the most compatible with Australia’s emissions reduction commitments and economic outlook – coal projects are forecast to retire by 2040, which is faster than market announcements. Despite renewables accounting for nearly 40% of NEM energy in H1 2023, the Step Change scenario reveals significant project delays for renewable energy projects.
Submissions on the draft ISP are due by 16 February with the final ISP expected on 28 June 2024.
‘Extreme weather’ tops World Economic Forum global risk list
While global security dominates at the World Economic Forum (WEF) in Davos this week, environmental risks continue to top the broader risk landscape. In the latest WEF Global Risks Report 2024 ‘extreme weather’ was seen as most likely to present a material crisis on a global scale. The theme for this year's annual Davos meeting is 'Rebuilding Trust,' with a key discussion topic focusing on developing a long-term strategy for climate, nature and energy.
Meanwhile, in its Transforming Energy Demand White Paper released in January 2024, the WEF recommends a "roadmap" for private and public sectors to guide company and government energy transition plans. At COP28, over 120 countries pledged to double the pace of energy efficiency improvement.
Nature focus intensifies in Australia and worldwide
Australia is actively introducing a Nature Repair Market, collaborating with stakeholders, including First Nations organisations, to establish regulations and standards for biodiversity projects across various landholders. Biodiversity certificates, issued to landholders, will provide traceable data on environmental improvements, with market oversight by the ACCC (Australian Competition and Consumer Commission) and ASIC.
This initiative aligns with Australia's commitment to the Kunming-Montreal Global Biodiversity Framework at COP15, aimed at halting and reversing nature loss by 2030. The upcoming COP16 in Colombia prompts cautious optimism, but addressing diverse drivers of biodiversity loss, such as agriculture, harmful subsidies, pollution, and climate change, will remain crucial. Australia will host the inaugural Global Nature Positive Summit in Sydney in October 2024, focusing on enhancing private sector investment for environmental protection[SD1] [KC2] and repair.
- Investors ‘flying blind’ to their climate risk exposure, according to research from the Oxford Sustainable Law Programme. Australia has the second highest rate of climate litigation in the world (behind the US), but researchers found few investors and regulators are taking these risks into account when evaluating companies’ climate-related financial risks.
- 'Say no to climate' votes decrease in Europe. According to new analysis, 17 European companies put their climate plans to a shareholder vote in 2023, marking a drop from 36 the previous year.
- ASX collaborates with the Clean Energy Regulator on an Australian Carbon Exchange. The ASX states that it is intended to operate similarly to a securities exchange, allowing Australian Carbon Credit Units (ACCUs) to be 'traded, cleared, and settled.'
- Mandatory agricultural emissions reporting. Climate Change Minister Chris Bowen announced the Government's commitment to working closely with farmers and stakeholders on the independent Climate Change Authority’s recommendations, proposing the NGER Scheme’s coverage to include the agriculture and land sectors.
- In December, global leaders, including Australia, united in support of the Declaration on Climate and Health. At COP28, Australia released its first National Climate Health Strategy, aimed at helping ensure Australia’s health system is prepared and has a plan to manage the impacts of climate change.
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