Disclosure & the key to the market

Who discloses, wins. Long-term access to capital markets will be increasingly determined by the ability of businesses to be transparent about how their operations impact the world around them.

Regulators around the region are already taking steps to improve corporate disclosure around climate. In January, Australian policymakers released a draft proposal that would require large entities to make climate disclosures phasing in from reporting periods starting on or after July 1, 2024.

In New Zealand, similar rules have been in place since the start of 2023, targeting banks and insurers with more than $NZ1 billion in assets, as well as equity and debt issuers with a combined face value exceeding $NZ60 million.

This compliance element to disclosure pressure is already strong around the region and will continue to grow, as will market and community expectations around transparency amid the shift to net-zero carbon emissions.

Choices

Climate disclosures have a number of positive outcomes. Investors benefit from the heightened visibility, allowing them to make better decisions around where to place their funds as they look to avoid the rising spectre of climate-related risk.

Businesses, too, benefit from the increased incentive to design their strategies in a way that avoids climate risk, and improves their attractiveness as an investment destination in the eyes of an increasingly climate-conscious market. The latter opportunity should only grow in the wake of international agreements reached at the recent COP28 event in Dubai.

Many businesses are already looking to take these steps. In January, the United Nations’ Taskforce for Nature-related Finance Disclosure (TNFD) revealed more than 300 global businesses with $US14 trillion in assets under management had agreed to start making disclosures in line with the recommendations of the taskforce.

The participants may benefit from somewhat of a head start on the broader business community, particularly as more concrete standards are set in the future. Indeed, the International Sustainability Standards Board has already indicated the TNFD recommendations would influence its thinking on the future.

What we see consistently across markets is that where some succeed, others quickly follow.  It’s not hard to see more and more businesses embracing disclosure practices voluntarily once they see the benefits play out over time.

Advantage

Data will play a greater role in lifting disclosure standards as businesses become increasingly digitised.

As technology continues to develop and the quality and breadth of data improve, the ability of businesses to measure and disclose data will also rise. This will inevitably lead to higher expectations around standards and reporting, which will in turn benefit everyone in the sector.

At ANZ, we want to be the leading Australia and New Zealand-based bank in supporting customers' transition to net zero emissions by 2050. That’s why we were so proud to be named IFR Asia’s ESG house of the year for 2023. Our sustainable-finance team is dedicated to supporting customer goals as they seek to make the shift to a net-zero economy.

The opportunities in the short-to-medium term for corporations in the realm of climate and nature risk are wide. Disclosure, mandatory or otherwise, will be a critical part of taking advantage of these.

Katharine Tapley is Head of Sustainable Finance at ANZ