ASIC chief Joe Longo backs compulsory climate disclosure

The corporate regulator is backing moves for compulsory disclosure on climate change by large companies as the federal government demands more action.

ASIC chairman Joe Longos backs moves for compulsory disclosure on climate change by large companies. Picture: David Geraghty

Australian Securities and Investments Commission chair, Joe Longo, is backing moves for compulsory disclosure on climate change by large companies as pressure grows on corporates to boost their reporting standards.

The move follows the federal government’s release of a paper on mandatory climate change disclosures for large businesses and financial institutions late last year.

Mr Longo will give more details about ASIC’s approach in a speech to be given to the Australian Institute of Company Directors in Melbourne on Thursday.

He will say that ASIC has been working with the Federal Government and other regulators including those overseas on moves to establish consistent standards for climate disclosure.

“ASIC has for many years advocated for voluntary disclosure in this area,” he will say.

“We now support the shift to mandatory disclosure.”

“We will continue to work closely with Treasury and other financial regulators through the council of financial regulators working group on climate risk.”

He will warn directors that they should be ready for “more rigorous reporting standards” coming into place in Australia.

“Given the pace of change domestically and internationally, boards should be already thinking about how to embed robust corporate governance practices ahead of more rigorous reporting requirements coming into place,” he will say.

Mr Longo’s comments come as corporate regulators around the world, including the US Securities and Exchange Commission, are moving towards mandatory requirements for disclosure around climate change and carbon emissions.

The SEC is considering the introduction of mandatory reporting requirements for all companies listed in the US.

In the past, ASIC has regarded this as an issue which is for government to address.

With increasing pressure on companies overseas to disclose their carbon emissions and plans to counter climate change, the federal government has been under pressure from groups such as the Financial Services Council to move towards mandatory disclosure so that investors can make accurate comparisons about what companies are doing.

ASIC’s backing for the shift now makes it almost inevitable that mandatory reporting requirements will come into place under the current government.

It also raises the question of the development of global standards on reporting with many large Australian companies operating globally with global investors.

ASIC is working with international securities organisation, IOSCO, to towards developing global standards on climate change reporting.

Mr Longo will also make it clear that ASIC is taking a tougher look at the provision of false and misleading information by company directors and officers.

This follows action taken by ASIC against health and wellness company, McPhersons, last December alleging that the former chief executive made a misleading statement to the market about a profit downgrade.

Mr Longo will warn in his speech that ASIC is taking a closer look at imposing civil penalties in cases where it believes directors of company executives have made false or misleading statements.

His comments follow action by ASIC this week against mining resources company Terracom, which alleges there was a falsification of certificates around the quality of its coal, and plant based milk producer, Noumi (formerly Freedom Foods), alleging that there had been a failure to disclose significant write downs of inventory and other material information.

Mr Longo will also warn companies about attempting to publicly discredit whistle blowers in their organisation.

He will tell directors that they are on notice to “avoid any conduct which could lead to the victimisation of a whistleblower.”

ASIC on Wednesday released a report on good practices for handling whistleblower disclosures.

Mr Longo will also warn directors that they need to be vigilant around their company’s exposure to cyber risks.

“Recent events should make it clear that cyber preparedness is squarely a board level issue,” he will say.