ASIC chair Joe Longo says ESG issues are driving the biggest changes in financial reporting in a generation.

ASIC chair Joe Longo says ESG issues are driving the biggest changes in financial reporting in a generation.Credit:AFR

Amid a boom in green finance,with fund managers around the world keen to spruik their environmental credentials,Longo said ESG was driving “the biggest changes to financial reporting and disclosure standards in a generation”.

“This is a transformational issue for global markets,and we need to be ready to meet that change at every step of its development,” Longo said in a speech to the Centre for Economic Development of Australia in Canberra.

Specifically,Longo pointed to looming global changes from the International Sustainability Standards Board,which are intended to set a baseline for sustainability-linked disclosure for capital markets. Longo said his message for firms was that they needed to be preparing for these reporting requirements,which are aimed at giving investors and markets better information on sustainability.

“These ambitious standards will require companies to adopt a systematic approach to collecting and analysing data across the company itself,and its supply chains. Preparation for that should be starting now,” Longo said.

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He said that in the next fortnight,the federal Treasury was likely to release a paper setting out the government’s plans for how the global standards on sustainability would be adopted in Australia. Longo said these standards were likely to become part of Australian law in the next 18 months,and companies had “no excuse” for not preparing now.

With financial firms keen to cash in on the surge in ESG interest,ASIC has made sustainable finance as a key priority,and it has previously launched a crackdown on “greenwashing” – where companies exaggerate or lie about their environmental credentials.

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ASIC has taken court action overalleged greenwashing this year,and Longo signalled that there was still room for improvement on this front.

“We are seeing inaccurate labelling and vague terms such as “carbon neutral” that aren’t founded on reasonable grounds,” Longo said,urging companies to read a recent ASIC report on greenwashing.

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As well as emphasising the scale of looming ESG changes,Longo also touched on the recent hype surroundingartificial intelligence,saying the issue had shot up the list of priorities for directors on corporate boards.

Longo said ASIC used machine learning for some of its data,and he also highlighted the risk of AI being exploited by criminals.

“The public debate talks about the evils of AI and the benefits of AI. From my perspective as a regulator,I do worry that AI presents new opportunities for fraudsters and people who are dishonest to scam people,to abuse identities. That the whole capability of this technology … to mislead people is huge,” Longo said.

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