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REVISED ASX CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS
DISCLOSURE OF CLIMATE CHANGE RISKS
Therehavebeenanumber of developments in recent years which have put pressure on companies to consider climate change risks and make appropriate disclosures in their annual reports. Australian shareholders have been taking a more active approach to pushing for disclosure of climate change risk by Australian listed companies by proposing shareholder resolutions on the topic at Annual General Meetings and have gone as far as launching legal proceedings against companies for failure to adequately disclose climate change risk in Annual Reports. In 2018, ASIC publicly stated that its key priorities in relation to climate change risks are corporate governance and disclosure, with ASIC Commissioner John Price highlighting that corporate governance practices for managing risks and opportunities should apply to climate change risks in a similar manner as these practices already apply to compliance risks, cyber security or digital disruption. The voluntary disclosure framework developed by the Taskforce on Climate- Related Financial Disclosures ( TFCD ) in June 2017 may help companies in considering how to disclose climate change related risks in a way which will take into account the general information needs of investors outside of the strict legal requirements for disclosure.
The ASX Corporate Governance Council ( the Council ) released the fourth edition of its Corporate Governance Principles and Recommendations on 27 February 2019. In the revised principles, there is a significant focus on organisational culture and a number of new board responsibilities are designed to focus on corporate culture and governance. Principle 3 has been substantially revised to require that a listed entity “…continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly”. In terms of new policies, the recommendations suggest that every listed entity should have a whistleblower policy and an anti-bribery and corruption policy. There is also a focus on risk management in the revised principles. This includes ensuring that the company has risk strategies to deal with contemporary and emerging risks such as conduct risk, digital disruption, cyber-security, privacy, data protection, climate change and sustainability. Under Rule 4.10.3 of the ASX Listing Rules, ASX listed entities are required to include in their disclosures a benchmark of their corporate governance practices against the Council’s recommendations. If an entity’s practices do not conform, then, in accordance with the “if not, why not” approach, they must disclose that fact and specify the reasons for the departure.
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