- ASX200 firms still have a lot of work to do on climate impact reporting ahead of the anticipated worldwide first sustainability standard, KPMG Australia says
- The Task Force on Climate-related Financial Disclosures (TCFD) is anticipated to serve as the foundation for a new global standrad, which is set to be implemented in 2022
- A KPMG benchmarking assessment of ASX200 annual reports shows only 35 per cent presently disclose their climate impact with reference to the TCFD recommendations
- Several more give TCFD-recommended material in a supplementary report or online rather than in the annual report
ASX200 firms still have a lot of work to do on climate impact reporting ahead of the anticipated worldwide first sustainability standard, according to a KPMG Australia review of corporate reports.
The International Sustainability Standards Board (ISSB), a sister agency to the long-existing International Accounting Standards Board (IASB), is expected to be founded during the COP26 meeting next month.
The new board’s first guideline, intended to establish worldwide consistency in sustainability reporting, is anticipated to focus on climate reporting.
The Task Force on Climate-related Financial Disclosures (TCFD), which is considered as best practice for reporting on climate effect, is anticipated to serve as the foundation for the standard, which is set to be implemented in 2022.
According to a KPMG benchmarking assessment of ASX200 annual reports, only 35 per cent presently disclose their climate impact in their annual report with reference to the TCFD recommendations.
Several more give TCFD-recommended material in a supplementary report or online rather than in the annual report, and 25 per cent do not mention the TCFD but discuss climate risk in their risk section.
KPMG Australia’s Head of Better Business Reporting Nick Ridehalgh said while the majority of ASX 200 companies are reporting on their climate risk, many don’t follow TCFD practice.
“This means that when the new climate standard is introduced likely next year, these companies face a considerable amount of work to prepare for it,” he said.
“Those who have already adopted TCFD – and there has been a significant increase in the numbers doing so in the past two or three years – will be much better placed to cope with the new standard.”
Mr Ridehalgh said the first International Sustainability Reporting Standard will be a game-changer.
“It is driven by global investors and is being introduced to give sustainability information the same rigor and comparability that the capital markets expect of financial information,” he said.
“Market transparency requires that companies provide a more complete view of how their long-term value is created, not just short-term financial results.
“The interconnectivity between sustainability related information and financial information is now being recognized, and effective capital allocation and investment flows in global markets demands ‘investment grade’ sustainability information.”
Other areas of reporting, according to the KPMG research, require improvement as well. While the majority of ASX200 firms now offer a narrative on how the organisation has done in attaining its strategic objectives in addition to its financial situation, just 12 per cent include performance versus targets, budgets, and pre-defined measurements.
The majority of companies continue to provide minimal commentary on their future outlook, with the majority focusing on financial expectations over the next 12 months.