Global and domestic regulators alike are drilling in the impact of climate change on Australian businesses, and the SME community is no exception.
A forum of regulators in Sydney, hosted by ASIC, indicated financial regulators worldwide are increasingly focusing on climate change risks and disclosure reporting in finance.
Though the focus was on financial services giants, new reporting expectations could be a sign of things to come for Australian business.
“I actually think that you will be surprised to the degree to which the momentum will increase around the expectation of businesses to describe with more and more precision what risks they are running... not their effect on the environment themselves, but the risks they are running in the context of policy to transition to a lower carbon world,” said Ashley Alder, the chairman of the International Organisation of Securities Commissions (IOSCO) and CEO of the Securities and Futures Commission of Hong Kong.
“Or, to the extent that policy may or may not succeed, the physical risks of climate change upon those businesses. And that is really how this issue of regulation and climate change is currently being positioned; it is being positioned around financial risks, which gets straight into the remit of central banks and also the regulators, the securities regulators, etc,” he added.
“It’s a question of gauging what those financial risks might be and as Mark Carney (the governor of the Bank of England) has put it: How do you get better information to price those risks? And that flows right through from asset management to the company businesses themselves to intermediaries, to credit rating agencies, etc,” he said.
A recent Director Sentiment Index undertaken by the Australian Institute of Company Directors found that climate change was the number one long-term issue that company directors want the federal government to address, particularly given that corporate governance practices and the disclosures of companies are coming under increased regulatory scrutiny.