ESG reporting is the “next stage” in better transparency: ASIC chair

Environmental, social and governance (ESG) reporting is the next stage in a long series of vital moves towards better transparency in organisations, according to ASIC chair Joe Longo.

Longo addressed attendees at the AFR environmental, social, and governance (ESG) Summit earlier this week discussed the importance of ESG reporting and how it isn’t a trend.

He said ESG is not about burdening companies with bureaucracy or shareholders with less-than-optimal returns.

“It’s not a question of ‘shareholder returns or ESG’, but of shareholder returns with ESG. Rather, it’s a question of fair and efficient markets, and of confident investment,” he said.

“At the same time, there’s no denying that this is a complex and rapidly changing space. Globally there is unrelenting progress towards developing clear standards and taxonomies of reporting. The ‘E’ of ESG will likely expand over time, with mandatory disclosures around climate being only the beginning, not the end.”

ASIC has begun cracking down on greenwashing, last year Longo announced the new focus areas for the commission. 

The ASIC then launched its first case against Mercer Superannuation for its greenwashing tactics earlier this year. 

Longo said these changes have begun, and they’re rapidly gaining momentum. But changes in ESG reporting tomorrow don’t excuse complacency today.

“Looking ahead to uncertainty doesn’t excuse inaction. Some firms are making good progress, but we cannot let standards slip as we prepare for the major changes ahead,” he noted.

Longo told the audience that markets are now pushing into new areas of ESG.

“Areas like nature and biodiversity. We are seeing the Taskforce on Nature-Related Risks on a similar track to its precursor, the Taskforce on Climate-Related Financial Disclosures,” he said.

The Australian Government has also made clear its intention to mandate climate disclosures.

Longo said the International Sustainability Standards Board has been working to finalise and issue its first two standards, by the end of this month.

“These will be standards on general sustainability requirements and climate-related financial disclosures,” he said.

“None of this should be cause for concern. It is simply a reminder that good disclosure depends on good governance.”

Longo explained that companies need to consider integrating these considerations into their governance structures and asking themselves three fundamental questions.

“How can sustainability and financial reporting work together to function as an integrated whole? How can we ensure that marketing and advertising teams work with the legal and risk teams to ensure cohesion around sustainability-related claims?

“What assurances and processes can be put in place to ensure that the board is appropriately informed and confident about the information that is being put out?” he said.

Longo concludes saying change is coming and “will not look kindly on those who aren’t prepared."