Appointment of the Inaugural Australian Anti-Slavery Commissioner
On 11 November 2023, the Attorney-General announced the appointment of Chris Evans as the inaugural Australian Anti-Slavery Commissioner (Commissioner).
Chris Evans will commence his five-year term as Commissioner on 2 December 2024. He has previously served as CEO of Walk Free's Global Freedom Network and played a significant role in campaigning for the introduction of the Modern Slavery Act 2018 (Cth) (Modern Slavery Act). Prior to his time at Walk Free, Mr Evans was a Senator for Western Australia, serving for two decades. The appointment comes after the Governor-General assented to the Modern Slavery Amendment (Australian Anti-Slavery Commissioner) Act 2024 (Cth) on 11 June 2024 (Amendment Act).
The Amendment Act establishes the position and functions of the Commissioner which include:
The Australian Government committed AU$8 million over four years in the 2023-24 Budget to support the establishment and operations of the Commissioner.
For more information on the role of the Commissioner, you can read our June 2024 ESG Policy Update - Australia.
Feedback Sought on Proposed Guidance on Sustainability Reporting Regime
On 7 November 2024, the Australian Securities and Investments Commission (ASIC) released a draft regulatory guide on the new sustainability reporting regime for consultation with stakeholders.
As reported by K&L Gates on 11 September 2024, certain organisations will be required to make mandatory climate-related financial disclosures in their annual reports for financial years commencing after 1 January 2025.
ASIC Commissioner Kate O'Rourke said the focus of the Draft RG is to assist preparers of sustainability reports to comply with their obligations so that users are provided with high-quality, decision-useful, climate-related financial disclosures that comply with the law and relevant accounting standards.
Comments are due by 19 December 2024, including feedback on any other areas where guidance should be provided.
Standby for a separate ESG Alert on this Draft RG.
Concern Over Governance Gap With Use of AI by Licensees
In October, ASIC published its first report on 'Governance arrangements in the face of artificial intelligence (AI) innovation'. The report examines the ways Australian financial services (AFS) licensees and credit licensees are implementing AI that directly or indirectly impacts consumers, identifying a governance gap.
ASIC reviewed 624 cases of AI use by 23 licensees in the banking, credit, insurance and financial advice sectors. Whilst overall, ASIC's findings indicate that the way licensees use AI is cautious in terms of decision making and interactions with consumers, acceleration is rapid and 61% of licensees in the review are planning to increase AI usage in the next 12 months.
ASIC is concerned that not all licensees are well positioned to manage the challenges that are likely to accompany their increasing use of AI.
The report made the following key observations on the use of AI by licensees:
ASIC outlined its key findings in respect of risk management and governance, noting that:
ASIC Chair Joe Longo has emphasised the importance of updating governance frameworks to manage the risks associated with AI, such as misinformation, algorithmic bias, and data security issues. He stressed that licensees must not wait for new AI laws but should ensure their governance and compliance measures are robust to handle AI's challenges and benefits responsibly.
Climate Goals Increasingly Forming Part of Executive Remuneration, but Challenges Remain
A study published by the Investor Group on Climate Change (IGCC) and Pollination Global Holdings Limited (Pollination) has found that whilst Australian companies are increasingly linking executive remuneration to climate goals, doubts remain in the effectiveness of this practice.
The study was completed by benchmarking 14 high-emitting companies listed on the Australian Securities Exchange (ASX) against a set of Guiding Principles developed by the IGCC and Pollination which purport to represent best practice in linking executive pay to climate performance.
The Guiding Principles aim to establish a base for effective climate incentives and also encourage a principled approach to ensure the development of unique climate-linked incentives which are simple, measurable and suited to the sector in which the company operates in, rather than a standardised approach across all industries.
In 2024, 54% of ASX200 companies have integrated climate-related targets into executive remuneration, up from 10% in 2020. Increased regulatory obligations and reputational concerns are cited as common factors driving this growth.
The study contends the best examples of climate incentives were those clearly linked to the company's climate strategy and time horizons and were ambitious and measurable. However, in many other cases, selected metrics are failing to create strong climate transition outcomes, particularly due to difficulty aligning long-term commitments with meaningful short-term action.
The study recommends that companies develop a credible climate strategy before incentivising action to ensure proper strategic alignment and ensure that strategy is functionally integrated into its operations through effective governance, capital allocation and reporting frameworks. Further, it is suggested that providing an engagement framework for investors to evaluate company performance will also foster improved strategic alignment and encourage companies to pursue long-term sustainability over short-term gains.
View from Abroad
80% of Global Financial Regulators Aligned with ISSB, TCFD Recommendations: FSB Report
On 12 November 2024, the Financial Stability Board (FSB) released its 2024 progress report on Corporate Climate-related Disclosures (Report). The Report emphasises the strides made by global jurisdictions in implementing International Sustainability Standards Board (ISSB) disclosure standards.
The Report's key findings were as follows:
ISO Announces new ESG Implementation Principles at COP29
At the 2024 United Nations Climate Change Conference (COP29), the International Organisation for Standardisation (ISO) announced new Environmental, Social and Governance (ESG) Implementation Principles (Principles). Global ESG regulations have increased by 155% in the past decade, which has created a challenging environment for consistent reporting across different jurisdictions and sectors. The Principles aim to assist organisations to navigate this increasingly complex ESG landscape.
The Principles were developed in consultation with national bodies, including the British Standards Institution, the Standards Council of Canada and the Brazilian Association of Technical Standards, and incorporate input from over 1,900 industry experts across 128 countries. By providing a standardised structure for sustainability practices designed for use by organisations of all sizes and sectors worldwide, the Principles: