Increased expectations around climate change risk disclosure and governance
Corporate News - 20 May 2021
As market expectations for disclosing and managing climate change and environment risks continue to rapidly rise and evolve, directors of Australian companies need to ensure they are robustly considering such issues as part of governance and disclosure frameworks. The Australian Securities and Investments Commission (ASIC) and the Australian Securities Exchange (ASX) now recognise climate related risk as a subset of financial risk and there is an emerging body of opinion that a failure to properly consider and disclose foreseeable climate related risks to the company’s business may constitute a breach of a director’s duty of care, skill and diligence.
On top of this, activist and shareholder pressure for proactive corporate climate risk management and risk disclosure has never been greater, with increased likelihood of shareholder class actions for inadequate or inaccurate climate-related disclosures. Potential liability for misleading disclosure (in the form of ‘greenwashing’) may also arise where there appears to be inconsistency between a company's stated position on climate risk management and its internal strategy and actions. In addition, there is a rising expectation that performance targets for executive remuneration are tied to climate change and sustainability measures.
Against this backdrop, we encourage all publicly listed companies to establish climate change governance and disclosure frameworks and ensure those frameworks are supported by effective implementation and ongoing review.
Against this backdrop, we encourage all publicly listed companies to establish climate change governance and disclosure frameworks and ensure those frameworks are supported by effective implementation and ongoing review.
Climate change is a particularly complex area but one that needs to be front of mind for all Australian companies. We are happy to provide all clients with guidance on the regulatory requirements and expectations, suggested governance frameworks as well as next steps. Please contact us in our Perth office on +61 8 9321 4000 or our Melbourne office on +61 3 9111 9400.