Climate risk disclosures becoming more common, report finds

Climate risk disclosures are on the rise, as more companies across the world are disclosing climate-related risks in their financial statements, according to a new joint study published by Chartered Accountants ANZ, University of Melbourne and the University of Queensland.  

The new report titled ‘Climate-related financial impacts’, highlights that more than one-third (35%) of entities across the globe are including climate disclosures as part of their financial statements in 2023. This number has dramatically increased from just 18% two years ago.  

“Climate risks are impacting companies’ disclosures concerning asset valuations, impairment testing, financial risks, and provisions,” said Chartered Accountants ANZ’s Reporting and Assurance Leader, Amir Ghandar. 

“As you would expect, emissions intensive industry sectors such as energy and utilities have a larger proportion of companies impacted, but we’re also seeing sectors such as consumer staples and financials calling out climate risks as a key financial consideration,” Mr Ghandar said. 

The study looked at the sample size of 356 companies worldwide, with 200 of these companies listed on the Australian Stock Exchange (ASX) that have an up-to-date June 2023 balance sheet.  

The study comes on the back of draft legislation released by the Australian Government earlier this year that aims to introduce mandatory reporting for relevant entities in a bid to establish a new climate disclosure framework. If the proposed reforms become law, relevant entities will be legally required to include an annual sustainability report to go with their annual financial statements.  

The Federal Government believes these reforms will help in furthering Australia’s ambitions to achieve net zero emissions. 

“These results demonstrate the impacts of climate risk as a financial issue, and investors have increasingly been calling for greater transparency and consistency,” said Mr Ghandar. 

“This is no doubt a primary motivation behind the Government’s climate-related financial disclosure draft legislation, and robust assurance will be essential to achieve the level of integrity and investor confidence needed for these new disclosures.”