INTHEBLACK December 2021 - Magazine - Page 8
AT A G L A N C E
GET SMART
// C PA A U S T R A L I A P O L I C Y
DECEMBER
UPDATE
Claire Grayston FCPA,
CPA Australia’s policy
adviser, audit and
assurance
The uptake of environment,
social and governance
(ESG) reporting is
gathering pace in response
to increased pressure from
investors for companies to
report and address climaterelated risks appropriately.
The International
Sustainability Standards
Board (ISSB) aims to help
establish a standardised
approach to reporting
to meet rising demand.
As ESG reporting
continues to grow
and evolve, there is
an increasing need
for assurance to boost
the credibility and trust
in ESG reports.
INVESTORS CALL
FOR ESG REPORTING
THE MOUNTING PRESSURE ON ORGANISATIONS TO PRODUCE DETAILED CLIMATERELATED REPORTING MEANS THAT, IN THE NEAR FUTURE, AUDITORS WILL NEED TO
MATCH THEIR CAPACITY FOR CONDUCTING FINANCIAL AUDITS WITH EXPERTISE IN
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) ASSURANCE.
T
CLICK HERE
TO ACCESS
CPA Australia’s
policy submission
on the design of
sustainability
standards
CLICK HERE
TO ACCESS
CPA Australia’s
climate change
policy statement
8 ITB December 2021
he call for corporate accountability for
environmental, social and governance
(ESG) issues is getting louder.
Australian climate change policies have
been widely criticised as inadequate, but pressure
for increased climate-related reporting is building
independently of government policy.
The Australian Council of Superannuation Investors
(ACSI) states that its members, with combined assets of
more than A$1 trillion, will vote against the re-election of
directors they believe have failed to manage climate risk
appropriately.
Investors are increasingly expecting companies to
address material climate-related risks, including adopting
the Financial Stability Board’s Task Force on Climaterelated Financial Disclosures (TCFD) recommendations,
aligning their strategies with the Paris Agreement based
on scenario analysis, setting emissions reduction targets
and managing physical risks.
That call is increasingly being answered by companies,
with the uptake of ESG reporting gaining momentum
under a variety of different frameworks, including
sustainability reporting, integrated reporting, climaterelated disclosures and reporting against the UN
sustainable development goals or Paris-aligned accounts.
In November this year, the International Financial
Reporting Standards Foundation established the
International Sustainability Standards Board (ISSB)
to sit alongside the International Accounting Standards
Board, with a sustainability reporting standard to be
issued in 2022.
The ISSB will help to establish a standardised approach to
sustainability reporting to meet market demand.
SHIFT IN REGULATORY EXPECTATIONS
The significant shift in focus for corporate reporting is
being fuelled not only by investor lobbyists, but also by
regulatory expectations and risk mitigation by the
entities themselves. The US Securities and Exchange
Commission is expected to mandate climate-related
disclosures following its recent consultation. The UK
has committed to the introduction of climate-related
reporting before 2025 with a staged approach, meaning
that a significant portion will be in place by 2023. In
New Zealand, mandatory climate-related disclosure
reporting is being introduced from 2023, with assurance
on reported emissions to follow in 2025. This will drive a
sharp uptick in demand for professionals
and firms that have the necessary expertise in both
sustainability reporting and assurance.
Although mandatory requirements for ESG reporting
and assurance in Australia are limited to Clean Energy
Regulator schemes, other regulators are providing
increasingly strong direction on their expectations for
climate-related disclosures.
The Australian Prudential Regulation Authority
(APRA) has highlighted the need to address climate
risk, setting out its expectations in a guide. APRA is
also undertaking a Climate Vulnerability Assessment
with Australia’s largest five banks.
The Australian Securities and Investment Commission
similarly expects regulated entities to consider physical and