Listed entities – Have you done your Operating and Financial Review (OFR) health check?

Question

Comments

1

Is there a separate section in the OFR describing business and climate risks?

Something is better than nothing. No risk disclosure = red flag for ASIC.

2

Are disclosures entity-specific?

There is no checklist for this.

3

Are disclosures consistent with recent fundraising documents?

Fundraising documents also require business risk disclosure, so they are a good starting point (additional risks may have surfaced since the issue of the latest fundraising document).

4

Have you considered the ASIC Regulatory Guide 247 (RG 247) examples of what ASIC considers to be adequate and inadequate business risk disclosure?

Refer to Table 2 on pages 24-25 of RG 247.

5

Have you used the TCFD framework for your climate risk disclosure?

ASIC and the ASX have endorsed (and expect) TCFD disclosures as it will help with the transition to ISSB standards.

6

Have you referred to examples of TCFD disclosures made by other listed entities in your industry?

There are good and bad examples of TCFD disclosures out there. Make sure you pick the best ones to use as a starting point.

7

Are your risk disclosures balanced?

Disclose risks AND opportunities.

8

Have you engaged in ‘green-hushing’?

‘Green-hushing’ occurs when you believe you do not have to disclose climate risks because you did not disclose climate-related opportunities. ASIC does not accept this argument – it is not the kind of ‘balance’ they are looking for.

9

Have you applied the unreasonable prejudice exemption (section 299(3) of the Corporations Act 2001) to omit business and climate risk disclosure from the OFR?

ASIC does not accept a boilerplate line about non-disclosure due to unreasonable prejudice. Paragraphs 67 to 81 of RG 247 provides guidance on the use of the unreasonable prejudice exemption.

10

Are your OFR risk disclosures consistent with the financial statements?

Your auditors must read all the ‘other information’ in the annual report, including the OFR, and ensure it is consistent with the information in the financial report (ASA 720 The Auditor’s Responsibilities Relating to Other Information). This would include, for example, that assumptions disclosed regarding business and climate risks have been incorporated into measurement of balances, such as for impairment testing, onerous contracts, fair values, going concern, etc.