Climate-related reporting has moved rapidly from concept to practice. The question is: who’s doing the reporting work, and who will audit it?
In October 2021, the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021 was passed. It created a mandatory obligation for climate-related reporting by large NZX-listed companies, banks and managed investment schemes.
With its newly established legislative mandate, New Zealand’s standard setter, the External Reporting Board (XRB), began work on the underlying climate-related reporting standards to be aligned with the Task Force for Climate-related Financial Disclosures (TCFD) recommendations.
The XRB’s standard development work coincided with the establishment of the International Sustainability Standards Board (ISSB). Formed by the IFRS Foundation in November 2021, the ISSB’s mandate is for the creation and development of sustainability-related financial reporting standards. The ISSB released two standards in June 2023 – one general disclosure and the other focused on climate, based on the TCFD recommendations – and it is now considering developing standards in other areas of sustainability.
Mandatory assurance is currently limited to greenhouse gas (GHG) emissions disclosures. The XRB has issued an interim standard which provides a choice between two assurance standards, ISO 14064–3 or ISAE 3410. There remains an open question and discussion on extending these requirements and who should be responsible for providing that assurance. Currently anyone can provide assurance, so long as they apply the XRB’s interim standard.
Acting fast
By comparison and contrast, Australia caught up with New Zealand in a matter of months. Following two public consultations during 2023, the Australian Treasury released its final policy position statement and introduced legislation to parliament in March 2024. This legislation will apply to large listed and private companies, as well as certain not-for-profit entities and large emitters. There are three intended cohorts, with the largest companies commencing reporting from 1 January 2025 and everyone by 1 July 2027.
Similar to New Zealand, the Australian Accounting Standards Board (AASB) is developing the underlying standards for disclosure. The standards will be aligned with those issued by the ISSB, with some jurisdiction-specific amendments and limited to climate. The Australian Treasury is proposing assurance of climate disclosures (not just GHG emissions) be undertaken by the auditor, leveraging the work of experts. It also proposes that the domestic assurance standard aligns with the International Standard on Sustainability Assurance (ISSA) 5000.
As we look to build an assurance framework, it’s time for us to come together.
What next?
In New Zealand, the first sets of climate reports are already starting to be published and more are due as this year progresses (reporting commenced for balance dates beginning on or after 1 January 2023). There’s a similar story around the world, with other jurisdictions already requiring TCFD-aligned disclosures for listed entities and consultations now occurring on adoption of the ISSB standards.
Achieving that elusive comprehensive and consistent baseline in all areas of sustainability – critical for robust reporting and assurance – requires ongoing collaboration and discussion about the information investors around the world need to make decisions and a focus on minimising jurisdictional specific amendments. But, as our tongue in-cheek title suggests, gone are the days of working separately. Now, particularly as we look to build an assurance framework, it’s time for us to come together.
This article was first published by Acuity Mag at the following URL: https://www.acuitymag.com/opinion/climate-related-reporting-ca-anz-advocacy-june-july-2024?adobe_mc=MCMID%3D83724129966270391852705502550166032973%7CMCORGID%3DE8464D1A576ABE727F000101%2540AdobeOrg%7CTS%3D1721647171
