ASX Governance Guidelines Go Green

All Australian Stock Exchange (ASX) listed companies will be required to disclose their environmental, social and economic risks or explain why they haven’t under revised Corporate Governance Guidelines.

Recommendation 7.4, included in the recently released guidelines, states; ‘A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages those risks.”

The move was welcomed by key Australian business sustainability advocates.

Andrew Petersen, CEO of Sustainable Business Australia, said the introduction of the recommendation would bring environmental, social and economic risks to the fore and result in more companies measuring their sustainability impacts and performance.

“The previous guidance left it open for companies to consider environmental, social and economic risks despite their materiality to the business performance. As a result, only around 7 per cent of listed companies produced any sustainability disclosure.

“In redefining good corporate performance beyond financial indicators and collaborating with investors to support new metrics, Australian businesses have the potential to engage with employees and their supply chain, unlock and attract capital, and attract new customers.” he said.

Victoria Whitaker, Head of Australia for the Global Reporting Initiative, said the introduction of the recommendation was important recognition by the ASX Corporate Governance Council of the potential impact of environmental, social and broader economic issues on the financial bottom line.

“There is plenty of research now which shows that companies that consider their environmental, social and economic impacts and performance perform better financially,” Whitaker said.

“They attract long term investors and their share price experiences less volatility. And they contribute to the transition to a sustainable and resilient economy.”  

The move builds upon the ASX Corporate Governance Council’s previous guidelines, which listed environment and sustainability amongst a list of risks that companies ‘may’ consider.

The Principles and Recommendations were first adopted in 2003, and updated in 2007.  The final version follows the draft released in 2013.

By introducing this recommendation, the ASX joins Bovespa Brazil, Johannesburg Stock Exchange, Shen-Zeng Stock Exchange and the Shanghai Stock Exchange by requiring companies to disclose their sustainability performance, a trend that is advancing globally.