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ESG Impact: What you need to know - April 2024

This month we report on the looming deadline for large corporations and asset managers to prepare for mandatory climate reporting in Australia, Queensland’s new legislation with ambitious targets for carbon emissions and renewable energy, plus the faster focus on nature-based that’s coming from corporates and government, and more.


Deadline extension for climate reporting

Large companies (Group 1 entities) will have an extra six months to prepare for the proposed mandatory climate disclosures with the start date for reporting now planned for 1 January 2025, rather than 1 July this year.


The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill was introduced into Parliament on 27 March 2024, and, with the exception of the proposed timeline, it mostly aligns with the draft legislation released in January. 


Why does it matter?

Mandatory climate reporting represents an important reform for Australia’s business sector and is expected to provide the transparency that many stakeholders have been calling for. But it is not expected to not be easy. There are significant challenges for companies to navigate, with organisations like the Business Council of Australia and the Australian Council of Superannuation Investors campaigning for the delayed kick off.


The legislation is still required to pass through parliament. However, even with the proposed six-month extension, companies face a tight timeline in finalising their strategy for identifying and addressing climate-related financial risks and opportunities. 


Upskilling may be required for companies to meet their reporting requirements and, as their data will need to be assured, the government calls on the Auditing and Assurance Standards Board (AUASB) to develop the requisite auditing standards. With less than 12 months to the proposed start date, there is much preparation to be done.


Sunshine State boosts efforts to tackle climate change

The Queensland Government passed two key pieces of legislation this month to address climate change. The Clean Economy Jobs Act 2024 and the Energy (Renewable Transformation and Jobs) Act 2024 have locked in renewable energy generation targets to support 100,000 new jobs in areas including manufacturing, renewable energy generation and power transmission. 


An emissions reductions target of 75 per cent by 2035 has also been entrenched in law, and three renewable energy targets – 50 per cent renewable energy by 2030, 70 per cent by 2032 and 80 per cent by 2035 – have been locked in. A world-first AUD 150 million of guaranteed financial support has also been introduced as part of the Job Security Guarantee to upskill and support workers.


Why does it matter?

Along with its ambitious transition targets, the Queensland Government’s Job Security Guarantee paves the way to addressing just-transition concerns for those likely to experience the greatest impact of the climate transition. Queenslanders working in a publicly owned power station or relevant coal mine will be given opportunities for training and financial security as part of the transition.


As policymakers across Australia and the globe continue to sharpen their focus on climate change, just transition considerations will be vital to ensuring that those most affected by the energy transition are supported and do not bear the cost of change.



Green hydrogen manufacturing launches

Australia’s first commercial-scale hydrogen electrolyser manufacturing facility opened this month at Fortescue’s 100 hectare Gladstone site. The 2GW facility will produce proton exchange membrane (PEM) electrolyser stacks that have been developed in-house by Fortescue teams in Australia and the US. 


The development of the site was supported by the Queensland Government through the provision of an electrical substation, road network, communications and local scheme water connection, as well as the allocation of land. The Federal Government also contributed AUD 44 million from the Collaboration Stream of the Modern Manufacturing Initiative.


The facility is the first stage of a wider Green Energy Manufacturing Centre being developed by Fortescue in Gladstone. The company has also received approval to build a 50 MW green hydrogen production facility at the site.


Why does it matter?

Australia’s high hopes for a hydrogen industry have been off to a slow start, but Fortescue’s announcement may pave the way for further green hydrogen investments.


Green hydrogen has long promised to support the decarbonisation of hard-to-abate domestic sectors and assist in the creation of new industries, such as domestic green steelmaking, and the 2019 National Hydrogen Strategy positions Australia as a significant global supplier of green hydrogen by 2030. The South Australian government has also committed half a billion dollars to the Hydrogen Jobs Plan to build hydrogen power plant, electrolyser and storage facility near Whyalla by early 2026.


However, unclear potential for future contracts, high upfront capital expenditure and gaps in planning and policy continue to present obstacles. According to energy consultancy Wood Mackenzie, Australia has the second least comprehensive hydrogen policy framework of the world’s 16 largest hydrogen jurisdictions.


The recently announced Future Made in Australia Act seeks to enhance development of clean energy projects. Treasury’s announcement alludes to more opportunities for green hydrogen, but details are yet to emerge.


Qantas introduces a Nature Action Plan

More companies are turning their attention to nature-related risks and opportunities with Qantas launching a Nature Action Plan that outlines its commitment to address nature and biodiversity loss. 


Highlights include an AUD 10 million investment over 10 years in the Reef Restoration Fund to support scientists, traditional owners and local tourism operators to restore corals across the Great Barrier Reef and other iconic Australian coral reefs. The airline has also committed to publishing disclosures aligned to the Taskforce on Nature-related Financial Disclosures (TNFD) by the middle of next year.


The increased focus on nature in the corporate world follows the release of the TNFD’s final framework in September last year. The ground-breaking Kunming-Montréal Global Biodiversity Framework, signed by 188 countries at the UN Biodiversity Conference in December 2022, also casts a brighter light on biodiversity loss and sends a powerful message for companies to begin tracking and disclosing biodiversity-related information. 


Why does it matter?

The business sector is becoming more aware of the economic value of biodiversity with the World Economic Forum estimating more than half of the world’s GDP is moderately or highly dependent on nature. Ecosystems sequester carbon and there is a growing recognition that the emissions-reduction targets of governments and corporations cannot be achieved without nature-based solutions. 


Like Qantas, companies such as Lendlease, Barrick Gold and property group GPT have nature and biodiversity as a core element of their sustainability goals. The Australian Government’s TNFD Pilots – Australian Case Study Report is also encouraging many companies to begin assessing the impacts and dependencies that their operations have on nature.


Earlier this month, the Government announced plans to progress the second stage of its Nature Positive Plan, including the establishment of two new bodies, the independent national Environment Protection Australia and Environment Information Australia (EIA). 


Australia’s emissions-reduction targets are highly dependent on investment into renewables, and the second stage of the Nature Positive Plan includes an AUD 100 million commitment in resources to enable faster environmental approvals. The establishment of the EIA and the subsequent provision of nature-related data information is also expected to help in assessing nature-related risks and opportunities.


While some components of the Nature Positive Act have been delayed, we expect the focus on biodiversity to grow as more companies look to the TNFD to track and disclose risks and impacts on nature.


Westpac in Action

State of the carbon markets

How are carbon markets rising to the net-zero challenge? This question is the focus of a new carbon market report produced by the Carbon Market Institute (CMI) and supported by Westpac. 


The report, Carbon Markets and Australia’s Net Zero Challenge, provides an analysis of the state of the carbon market and its contribution to net-zero targets. It explores how the Australian Carbon Credit Unit (ACCU) scheme is essential to meeting the Paris Agreement goals by helping to create a climate change policy ecosystem that encompasses and connects technology, capital and the community. However, regular health checks of the carbon market will be required to ensure it is operating in a way that best serves capital allocation and social benefit. 


The report also notes that Australia is likely to become one of the largest producers of carbon credits in the world in the next decade, with ACCU demand forecast to peak at 31 million units in 2031. However, under a 1.5-degree scenario, it will require a significant boost of up to eight times the current level of land-based sequestration by 2050.


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