How companies - including small caps - could be impacted by the incoming climate disclosure rules
The Australian and US governments are soon expected to announce new rules for how companies should disclose risks and issues related to climate change, and which companies will be mandated to report such information.
Similar rules for what has become known as ‘climate-related financial disclosure’ are already in force in the UK, the European Union, New Zealand and in many other parts of the world.
Like the roll-out in other jurisdictions, the Australian and US governments are proposing a phased approach to introducing the new rules. In Australia, although the new legislation will at first impact only very large listed and unlisted businesses and financial institutions that meet certain requirements, the thresholds for turnover and employee headcount will lower annually until 2028, at which point it is estimated to impact around 20,000 organisations.
‘So what’ for small caps?
The mandating of reporting on large businesses is likely to impact all businesses because climate change data and risk management considers not just the activities of the company, but activities of all companies along its entire value chain. The value chain of small cap asset managers includes the companies they’re invested in, which could be yours. We explain how the mandating of reporting for large investment funds is likely to trickle down to small cap companies here.
Small caps should also be aware that their emissions data could be requested by larger institutional investors as part of their process for determining whether or not to invest.
How the new legislation will impact your company depends on:
To prepare, we suggest that:
We can help you determine how the new legislation might impact you, and how to respond.
Please get in touch if you’d like to discuss.
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11mo"The value chain of small cap asset managers includes the companies they’re invested in, which could be yours". This trickle down impact is a good point to be aware of! The advice for even small cap companies to start planning their emissions accounting is a great idea and tip!