AASB Sustainability Reporting Standards: Exposure Draft ED SR1

The AICD reiterated its support for a mandatory climate-related financial disclosure regime that is internationally aligned and meets the policy objectives of high-quality, comparable, and useful climate disclosures. Our key points, which were confined to governance and director-level issues, included:

• The AICD supports the principle of international comparability in reporting standards, as far as is reasonably practicable. However, we recognise some disclosure areas may require clarification in their application to the Australian context. We support necessary clarifications to reduce the compliance burden on entities.
• Given climate-related disclosures' inherently uncertain nature and that reasonable assurance is not required over all disclosures until 1 July 2030, entities and directors cannot provide an "explicit and unreserved statement of compliance" as currently proposed under the Draft Sustainability Standards. Any director or entity sign-off must be qualified and mirror what is required under the climate reporting legislation, which we say should be limited to directors opining that they have 'reasonable grounds to believe that' the climate disclosures are in accordance with the Sustainability Standards.
• Group 3 and Not-for-Profit (NFP) entities, if covered by the regime, should be subject to simplified reporting standards to avoid a compliance burden not commensurate to their climate impact or the needs of their users. Disclosures that could be simplified or removed include scope 3, scenario analysis and forward-looking financial impact disclosures.
• We agree that industry-based metrics should be initially voluntary to allow entities time to upskill and focus on the cross-industry metrics.
• Guidance is needed on the application of materiality and the "reasonable and supportable information available to the entity at the reporting date without undue cost or effort" test.