Mandatory climate-related financial disclosures

As Australia prepares for mandatory climate-related disclosures in 2025, these new regulations are considered one of the most significant shifts in financial reporting and disclosure in a generation.

Roc Partners sees value in the changes, which will enhance risk management, improve capital allocation through more transparent and reliable information, and boost Australia’s global competitiveness by aligning us closer to other nations.

In line with the ASRS reporting framework, we have made substantial progress in risk management and metrics, including emissions reporting and climate-related due diligence. Notably, we have mapped 90% of our GP funds exposed to institutional capital to our finance emissions reporting platforms.

Michael Lukin: Sam, Australia's new mandatory reporting on climate related disclosures was passed in September this year and comes into effect on the 1st of January 2025. We know it's going to be a change to the Corporations Act and obviously a lot of accounting disclosures will come as part of this new legislation.

Can you give us a bit of an overview as to what you see the regulation looking like and why it's important?

Sam Bayes: Absolutely, Mike. So Joe Longer from ASIC described ESG reporting creating the biggest changes to financial reporting and disclosure regimes in a generation. And we see this new reporting regime, the value that will bring us as threefold.

The first is risk management. So we know that businesses that are reporting on climate related risks and opportunities, we'll be making more informed decisions that are that will benefit all stakeholders, including investors. Capital allocation, so investors will be able to use this information to make more informed, transparent and reliable decisions in forming the investment decision making. And lastly, really keeping up with the international regime. So Australia is not the first nation to pass this type of reporting. We've seen similar reporting changes in the US, Europe, the USA, New Zealand and Japan.

So in order for Australia to remain competitive in the international market for capital, we really need to get on the bandwagon with these reporting requirements. So I actually see these reporting requirements is really exciting. The fact that it's creating such big changes and sustainability reporting will sit alongside financial reporting.

And we know that climate, it's kind of said climate first. So there'll be other sustainability reporting requirements to follow, but it's not going to come without its set of challenges. And Jen and I are certainly experiencing what we calling a healthy level of stress. But I think what's most interesting will be how investors will actually use this information to inform their decision making.

Michael Lukin: That's a great question, Sam. What are we going to do with all this information?

Jen, I know you've turned your mind to the information coming out of the ASRS regulation. How will Roc Partners respond to that regulation and where are we up to?

Jenna Lindbeck: Yeah, that's a great question Mike. And it's certainly the way we're thinking about it is twofold. It's firstly from a strategic perspective and also given it's regulation now from a compliance perspective.

But the strategic part is easy. Businesses that manage climate risk and opportunities to Sam's point earlier makes good business sense. It's fundamental to good decision making to manage climate related risk and opportunities as we enter a decarbonizing economy.

From a compliance perspective, however, it works well in our favour as an investor because we get access to a wealth of transparent and reliable information that we previously wouldn't have access to.

Compliance sometimes gets a bit of a bad rep, but we certainly see it as too complementary offerings in terms of it's great for our strategy and for our businesses strategy to manage risk and opportunity, but it's also great for our investor decision making because we have a wealth of data to rely upon now.

I think the second part of how we're considering it is very much aligned with the four key pillars of the ASRS reporting framework and those to remind everyone is governance, strategy, risk management and metrics and targets.

Now if we look back for the last two years, Sam and I've been really focused on, I would say metrics and targets and risk management. It's kind of our bread and butter.

So if we look about metrics and targets, scope one, scope 2, scope 3 emissions is only one part, but it's something that we're really proud of how we've progressed over the last 12 months. If you cast your mind back to doing our report 12 months ago, we were focused on finance emissions and how -do we get a great coverage of finance emissions in our multi strategy portfolio.

We're very pleased to report with the view of preparing ourselves for ASRS reporting. We've now mapped 90% of our GP funds that are exposed to institutional capital to our finance emissions reporting platform now, which has been a massive and it's hasn't been us that's doing, it's been a whole of firm approach. So that's been a really big achievement for us in terms of preparing for metrics and targets.

The other part we're well placed for is our risk management. It's our bread and butter. We're doing climate related due diligence, we're looking for red flags. We're starting also to get a little bit more rigour around portfolio construction and assessment and transition planning. So we're well placed to start to respond to that part of the reporting. Where I think we've got more work to do and what we should be focusing on over the next 12 to 18 months is on the governance and strategy pillars.

So we've got a great governance framework around our responsible investment policy and our broader ESG structure. Think we need to get a little bit more critical on how we introduce climate related governance into our business, who's accountable for it, what information do we need and importantly what training and capability do we need in those kind of governance roles and structures to make good decision making.

And the second part of that is strategy, how do we get on the front foot and make sure we're ahead of the curve and make sure we're in a great position as an investor, as an LP for our GPs and facilitating our own LP's strategies, making sure we're competitive as the economy starts to decarbonize.

Michael Lukin: Yeah, great. Thank you, Jen.

And I think the comment you made, Sam, around biggest change in corporate reporting in a decade.

Sam Bayes: generation.

Michael Lukin: In a generation, wow, even bigger. It's great to hear that Rocs on the front foot around this in terms of establishing our processes and also in terms of engagement with the industry and the broader private equity community around adjusting to this change in reporting requirements.

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