As part of modernization of the prudential architecture, the Australian Prudential Regulation Authority (APRA) has unveiled the digital version of its prudential handbook. Also recently finalized by APRA is the cross-industry guidance on operational resilience. Yet another key announcement from Australia comes in the form of the recently released sustainable finance roadmap of the Australian government. The roadmap has been developed in response to the Sustainable Finance Strategy proposed in November 2023.
The sustainable finance roadmap of Australia unveils, among others, the plans for mandatory climate reporting, sustainable finance taxonomy, and sustainable investment labeling, with the aim to mobilize investment for transition to net zero. The roadmap sets out 10 priorities across the three pillars of improving transparency on climate and sustainability, financial system capabilities, and government leadership and engagement. Below are the key next steps outlined in the sustainable finance roadmap in Australia:
Prudential guide: APRA will engage with stakeholders as part of reviewing the effectiveness of CPG 229, the Prudential Practice Guide on Climate Change Financial Risks, with a focus on key issues such as embedding climate risk considerations clearly in risk management frameworks.
Disclosure standards: The AASB will finalize climate-related disclosure standards, targeting August 2024. The AUASB will develop assurance standards for climate in late 2024, following the release of final international assurance standards in September 2024. The government disclosure obligations are expected to commence from January 2025 for Group 1 entities, July 2026 for Group 2 entities, and July 2027 for Group 3 entities. Post that, the government, led by Treasury and working with the Council of Financial Regulators (CFR), plans to conduct a review of climate-related financial disclosure requirements in 2028–29.
Sustainable finance taxonomy: ASFI will finalize development of the initial Australian Sustainable Finance Taxonomy by the end of 2024. This will cover “green” and “transition” activities that contribute to climate change mitigation, in six priority sectors, as well to as the “do no significant harm” and “minimum social safeguard” criteria. The government will review the industry-led voluntary taxonomy developed by ASFI, explore initial use cases for sustainable finance taxonomies in the financial and regulatory architecture by mid-2025, and consider relevant governance arrangements.
Transition plan disclosures and product labeling regime: The Treasury aims to develop and publish best practice guidance for the disclosure of corporate transition plans by the end of 2025 and will commence detailed policy work to develop a sustainable investment product labeling regime, including public consultation in early 2025. The government is targeting 2027 for regime commencement, subject to final policy decisions.
Data gaps: The CFR will make recommendations for addressing key sustainability data challenges to the government in early 2025. The CFR is focusing on four key topics: accessibility of corporate climate data by market participants, estimation and use of scope 3 emissions by business and financial institutions, data to inform companies’ assessments of physical and transition-related climate risks, and nature-related data relevant to understanding financial risks.
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