ESG: ASIC, ASX to probe climate change impact disclosures by companies

ASIC and the ASX will step up policing ‘greenwashing’ claims by companies that overstate purported emissions cuts in a bid to boost their public image.

ASX chief compliance officer Janine Ryan says the ASX is concerned about inadequate ESG disclosures from listed companies and funds. Picture: NCA NewsWire / Nikki Short

Company disclosures around climate change and environmental, social, and governance issues will be at the forefront of investigations from the corporate regulator and the market operator in the new financial year.

Speaking on Tuesday at the Governance and Risk Management Forum the Australian Securities Exchange, the Australian Securities & Investments Commission, and the Australian Charities and Not-for profits Commission each outlined their oversight priorities.

ASIC commissioner Sean Hughes said the regulator would be closely looking at climate change disclosures and exposures of companies in the coming year.

He said ASIC wanted to make sure investors were being appropriately informed.

This forms part of ASIC’s push around policing “greenwashing” claims from companies.

Greenwashing is when companies overstate purported emissions cuts or environmental programs in a bid to boost their public image.

Mr Hughes warned ASIC was concerned misstatements could damage “confidence and trust” in the corporate system.

“We think misrepresenting products in this case as green when they are not poses an issue,” Mr Hughes said.

ASIC is also closely looking at disclosures around cyber risk, with Mr Hughes noting it was having a “multiple effect” on the business landscape.

ASX chief compliance officer Janine Ryan said the market operator was also concerned about inadequate ESG disclosures from listed companies and funds.

She said the ASX wanted to ensure investors were getting “better quality reporting” around climate and ESG issues.

“As many of you probably know where the ESG framework is through our corporate governance recommendations,” she said.

Ms Ryan said as the ASX moved to its next stage of corporate governance principles it was going to lift guidance for market participants.

She said the ASX had commissioned KPMG to prepare three reports, due to be released in late June.

These reports will cover how listed companies have adopted the new principles around corporate governance and how they are responding to the ASX’s 30 per cent female boards target.

KPMG is also working on a report around disclosures on ESG issues and climate.

Ms Ryan said the ASX was monitoring disclosures from companies around climate and greenwashing.

The ASX was aiming to ensure companies properly disclosed if information was market sensitive and if not, whether it should be uploaded to market announcements.

“We see companies tripping themselves up there in disclose in non-binding MOU’s and letters of intent, often overstating the conditionality of the arrangements there,” she said.

“In some instances we’ve seen the share price move materially on an announcement that‘s not on the market. If that happens it may result in some corrective action.”

Commissioner Dr Johns, head of the Australian Charities and Not-for profits Commission, said the organisation was also looking at disclosures from monitored entities.

He noted changes to reporting would improve disclosures from charities.

But cautioned charities or senior figures in those groups from getting involved in political lobbying during the election, noting it could challenge the impartiality expected of them.

The US SEC in March proposed changes to its rules for listed companies to introduce mandatory reporting on their ­exposure to climate change risks including their own greenhouse gas emissions.

The Australian Accounting Standards Board supports voluntary disclosures aligned with the guidelines of the Task Force on Climate-Related Financial Disclosures (TCFD).

Originally published as ESG: ASIC, ASX to probe climate change impact disclosures by companies