Australia has unveiled proposed climate-related reporting standards, building on the International Sustainability Standards Board (ISSB) of the IFRS Foundation's sustainability disclosure standards.
The Australian Accounting Standards Board (AASB) released an exposure draft, following the government's plan to enforce mandatory climate-related financial disclosure requirements for companies and financial institutions, beginning in 2024 for large businesses and phased in over the next three years for smaller entities. The AASB's draft aligns with international reporting frameworks, taking cues from the ISSB standards.
Notable modifications include restricting climate-related disclosure requirements to risks and opportunities related to climate change, excluding non-greenhouse gas emissions. The proposal also provides flexibility for reporting Scope 3 value chain emissions and suggests the inclusion of 15 Scope 3 categories as examples, rather than mandatory disclosures.
For financial institutions, the Australian standard encourages consideration of additional disclosures rather than mandating them. Entities not exposed to material climate-related risks or opportunities must disclose this determination and explain the basis for it. These standardized, internationally aligned reporting requirements aim to enhance consistency, transparency, and accountability for both Australians and investors.
Updapt Views:
The Australian government's introduction of IFRS-based climate-related reporting standards enhances transparency, bolstering investor confidence and aiding in risk mitigation. These standards align with global practices, fostering accountability and demonstrating the government's commitment to addressing climate change.
Brazil's Securities and Exchange Commission (CVM) and Ministry of Finance have announced a mandatory requirement for public companies in Brazil to submit annual sustainability and climate-related disclosures, commencing in the year 2026. This pivotal step is underpinned by the newly established sustainability and climate-related disclosure standards released by the International Sustainability Standards Board (ISSB) of the IFRS Foundation.
The ISSB, which was inaugurated in November 2021 during the COP26 climate conference, was born out of a global need expressed by investors, corporations, governments, and regulators for a standardized framework of disclosure that enables a uniform comprehension of the impact of sustainability risks and opportunities on a company's future.
Brazil is the latest jurisdiction to join a growing roster of nations, including the United Kingdom and Australia, in adopting these globally recognized standards. Furthermore, the International Organization of Securities Commissions (IOSCO), a leading international policy forum for securities regulators, has urged regulators worldwide to incorporate the ISSB standards into their sustainability reporting regulatory frameworks.
This mandate is a significant component of Brazil's Ecological Transformation Plan, which aims to facilitate the transition to a green economy, backed by substantial investments of up to $350 billion in both public and private infrastructure.
In preparation for the mandatory reporting, public companies and investment funds in Brazil will have the opportunity to commence sustainability reporting voluntarily in line with the IFRS standards beginning in 2024. By 2026, mandatory reporting will be enforced for public companies. From 2027 onwards, sustainability reporting will be due within three months of the fiscal year's conclusion or concurrently with the release of financial statements, whichever comes first.
Updapt Views:
The introduction of mandatory sustainability reporting in Brazil promises several positive outcomes for businesses and companies. These include enhanced transparency, improved risk assessment, access to sustainable capital, competitive advantage, innovation, and operational efficiency. Alignment with global standards will strengthen the commitment to long-term sustainability.
Singapore's Monetary Authority of Singapore (MAS), the country's central bank and financial regulatory body, has issued a series of consultation papers that introduce comprehensive guidelines for financial institutions, encompassing banks, insurers, and asset managers. These guidelines clearly delineate MAS's expectations regarding the development of robust transition plans for achieving a net-zero economy and addressing the physical impacts of climate change.
A notable element in these guidelines emphasizes an engagement-centric approach over divestment when crafting transition strategies. Financial institutions are urged to actively collaborate with clients and portfolio companies, addressing both physical and transition risks, and assisting them in reducing their carbon footprint while enhancing climate resilience. According to MAS, the blanket withdrawal of financial support from companies with credible transition plans may hinder their decarbonization efforts.
MAS further advises financial institutions to adopt a multi-year perspective in their transition planning, extending beyond conventional timelines for comprehensive risk assessment and integrated climate mitigation and adaptation measures. This approach includes a holistic evaluation of physical and adaptive climate risk, encompasses environmental risks beyond climate concerns, and considers the intricate interplay of these factors in transition planning. Financial institutions are also directed to disclose pertinent information to stakeholders, offering insights into their responses to climate-related risks and their governance and risk management processes.
MAS's approach acknowledges that short-term emissions increases may be inevitable within these transition plans, provided they contribute to climate-positive outcomes consistent with a net-zero trajectory. Regulatory support is deemed crucial to assist financial institutions in these endeavors, underscoring MAS's role in establishing precise supervisory expectations for transition planning within the financial sector.
Updapt Views:
The issuance of comprehensive net-zero transition guidelines by MAS in Singapore will address critical challenges by promoting climate resilience, reducing carbon emissions, and facilitating sustainable economic growth. These guidelines empower financial institutions to actively support clients and portfolio companies in their transition to a net-zero economy, contributing to environmental preservation and long-term economic stability.
The European Union Council has recently reached a pivotal 'general approach' consensus on an initiative aimed at enhancing and modernizing CO2 emission standards for heavy-duty vehicles. This proposed reform is designed to drive further reductions in CO2 emissions within the road transport sector, and it introduces new targets for 2030, 2035, and 2040. These stringent regulations align with the European Union's steadfast commitment to combat climate change.
Moreover, the proposal seeks to stimulate the growth of zero-emission vehicles within the extensive EU heavy-duty vehicle fleet while safeguarding innovation and maintaining the sector's competitiveness. This 'general approach' now stands as the foundation for forthcoming negotiations with the European Parliament to finalize the legislation. The Council's approach artfully balances the overarching objective to minimize the environmental footprint of the heavy-duty vehicle industry while allowing member states some latitude in implementing the revised regulation, emphasizing innovation and bolstering the EU's competitive stance.
Incorporating a more comprehensive scope, the proposal expands the regulatory reach to encompass nearly all new heavy-duty vehicles, including smaller trucks, urban buses, coaches, and trailers. Nonetheless, exemptions are provided for specific categories, such as small-volume manufacturers, vehicles used in specialized sectors, and vocational vehicles like garbage trucks.
To remain consistent with the EU's 2030 climate goals and beyond, the Council maintains the Commission's emissions targets. This includes a 45% reduction by 2030, increased from the prior 30%, followed by 65% by 2035 and a notable 90% reduction by 2040.
Additionally, a compelling development is the introduction of a 100% zero-emission target for urban buses by 2035, accompanied by an interim target of 85% by 2030. A thorough review clause, initiated in 2027, will assess the effectiveness of these targets, alongside a focus on infrastructure development and a carbon correction factor.
Updapt Views:
The European Union's efforts to enhance CO2 emission standards for heavy-duty vehicles are pivotal in addressing pressing challenges. These regulations not only contribute to improved air quality, heightened energy efficiency, and the well-being of citizens, but they also have positive implications for the automotive industry. The adoption of more fuel-efficient vehicles translates into reduced operational costs. In essence, these measures foster sustainability and eco-friendly practices within the logistics sector, aligning harmoniously with overarching climate objectives.
The UN Global Compact recently introduced new business guidance on sustainable infrastructure during an event in Beijing, attended by prominent figures from government, industry, and academia. These guidance tools aim to promote sustainable infrastructure development under the Belt and Road Initiative (BRI), the world's largest corporate sustainability initiative.
Two key resources were unveiled: Global Compact Ten Principles Applied in Infrastructure Sectors under the Belt and Road Initiative, focusing on human rights, labor, environment, and anti-corruption principles, and Maximizing Impact towards the SDGs, a tool for assessing and guiding companies in advancing sustainable infrastructure within the BRI.
These resources emphasize the pivotal role of businesses in the BRI, encouraging innovation, economic growth, and responsible resource management to ensure that infrastructure projects serve both immediate and long-term sustainable development goals.
The reports also shed light on the alignment between the BRI and the Sustainable Development Goals (SDGs), offering practical insights and tools to help companies adhere to the UN Global Compact's Ten Principles, covering human rights, labor, environment, and anti-corruption.
A High-Level Steering Committee highlighted the critical role of the Action Platform in promoting responsible business participation to accelerate SDGs through infrastructure projects. The project's successful completion was facilitated by the UN Peace and Development Fund (UNPDF), which fostered collaboration among diverse stakeholders and provided essential resources.
Updapt Views:
Infrastructure development is vital for economic growth and societal progress. Hence, it is paramount that infrastructure projects prioritize inclusivity, sustainability, and ethical business conduct. These guidance reports serve as essential tools for optimizing logistical efficiency, mitigating emissions, and extending the reach of global trade networks. Furthermore, it promotes the seamless integration of renewable energy sources, thereby fortifying sustainable power generation systems.
