Banks and other big businesses will be forced to come clean with the public about what they are doing to cut emissions under plans put forward by the Albanese government.
The government is also looking for ways to crack down on “greenwashing” – or when businesses try to win over consumers by overhyping their environmental practices.
The treasurer, Jim Chalmers, will say in a speech in Sydney on Monday that Australian firms “need to make credible disclosures to remain competitive in global capital markets”.
“There’s now broad acceptance that proper disclosure of these financial risks and impacts isn’t a nice-to-have extra,” he will say, according to speech notes distributed by his office in advance.
“This information is need-to-know – essential to mobilising the weight of our financial system behind the net zero transition.”
Treasury will release a consultation paper on Monday on the development of an Australian climate risk disclosure system.
The government argues business and investors need clarity and certainty to manage climate risks and invest in new opportunities. It wants large business and financial institutions to provide “more information and greater transparency on how they are responding to climate change and supporting the transition to net zero”.
The government says the reporting requirements are expected to be mandatory for large entities and phased in over time. It also plans to apply “appropriately tailored requirements to comparable commonwealth public sector corporate entities and investment funds”.
The director of policy at the Investor Group on Climate Change, Erwin Jackson, welcomed Australia “catching up” on climate-related disclosures. He said this could “support the unlocking of the billions of dollars of investment that are going to be needed on the transition to net zero”.
Jackson said climate disclosure arrangements in Australia were a “dog’s breakfast”.
“We have very large number of companies voluntarily disclosing at the moment but one company discloses one thing and another company discloses another thing and it’s really impossible for investors to get clear information to compare companies,” he said.
“The sooner investors have clarity on the robustness of companies’ plans, the sooner they’ll be able to back those companies and industries on delivering the new industries and the new jobs that are going to be created as we address climate change.”
The government has also asked Treasury to develop a comprehensive strategy to deepen Australia’s green finance markets and seize opportunities presented by surging global momentum in sustainable finance.
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Chalmers will say global investors increasingly see “a new harmony between profit and planet”.
Australia should respond “by making our country a world leader in sustainable finance, taking a larger slice of the growing green investment pie”, he will tell the Australian Sustainable Finance Institute.
Chalmers says the government is focused on “confronting and cracking down on greenwashing – ensuring the credibility of sustainability-related financial targets, products and investments – because credibility is everything”.
He flagged the need to “develop coordinated strategies to prevent greenwashing in the corporate sector and financial markets” in a letter to the Council of Financial Regulators.
The newly released letter to the Reserve Bank governor, Philip Lowe, in his capacity as chair of the CFR also seeks support for “standardised, internationally-aligned climate-related financial disclosure requirements for large businesses and financial institutions”.
Treasury has asked for public submissions by 17 February.