The climate-related financial disclosure (CRFD) legislation that was introduced into Parliament in late March 2024 has cleared the next hurdle. Last Friday (3 May), the majority of the Senate Economic Legislation Committee recommended that the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 be passed without further amendment. Our notes on the CRFD legislation are available in our previous article, ‘Mandatory climate-related financial closure bill introduced’.
The two Coalition members of the Committee dissented from the Committee’s recommendation, raising concerns about the limited time given to the Committee to hear from witnesses. Senators Andrew Bragg and Dean Smith were also concerned about the impact of the regime on Group 3 entities, recommending that they be excluded or that the threshold for reporting be lifted to $100 million in gross revenue and $50 million gross assets. If this change is not made, they recommended applying simplified climate reporting standards and removing the audit requirement for this cohort.
Senators Bragg and Smith also recommending the Minister’s proposed discretion to add additional environmental disclosure be removed or made subject to explicit requirements of industry consultation; the modified liability protections extend to statements outside the annual report that replicate information in a Sustainability Report; power to enforce the law be left exclusively with the regulator for an extended period; and assurance requirements be re-examined in four years.
Greens Senator Nick McKim expressed concern that the new law “forces the issue of transition risk to be considered by companies, but leaves confronting the physical impacts of climate damage on a company as a mere option”. The Senator recommended that the legislation stipulate the type of scenario analysis to be included, and require reporting entities to use at least two possible future scenarios including a low (1.5 degree) and a high (>2.5 degree) warming scenario.
Independent Senator David Pocock also made recommendations about the modified liability arrangements, including that they should apply to one or two years from implementation for each cohort, and that they should not apply to large National Greenhouse and Energy Reporting Act (NGERA) reporters and only exclude misleading and deceptive conduct claims for loss or damage. He also recommended that ASIC be given additional resources to enforce the law over the transition period.
The bill will now progress for debate.