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In this Edition, we share some key insights from ASIC’s recent Corporate Finance Liaison Meeting and consider AICD’s new guide to promote stakeholder engagement, commentary on directors’ duties relating to climate change and ASX’s consultation paper on proposed changes to oil and gas reporting requirements. We also consider the role of critical minerals in the transition to renewable energy.
GOVERNANCE & REGULATION
ASIC’s Corporate Finance Liaison Meeting. ASIC’s recent round of Corporate Finance Liaison Meetings provided an opportunity for the regulator to emphasise its focus on climate change risks and “greenwashing” issues (see below), and the cyber resilience of listed entities. Unsurprisingly, ASIC noted the strong initial public offering market which has continued throughout the first half of 2021. ASIC confirmed it will continue to focus on the extent to which issuers have been or will be affected by COVID-19, and ensuring that this is addressed in disclosure documents in a manner appropriate for retail investors. On the corporate governance front, ASIC noted it had conducted a review of 102 entities’ whistleblower policies and identified some concern with respect to references to the old whistleblower protection regime. It is likely to expect that ASIC will keep a close watch over entities’ whistleblower policies, and Boards should ensure they are comfortable that the entity’s policies comply with the new regime.
AICD releases new guide to stakeholder engagement. The AICD has released a practical guide to help directors identify and elevate stakeholder voices to the board. The Guide explores the board’s role in stakeholder governance, directors’ legal duties in relation to stakeholders and how boards can balance the interests of stakeholders when making decisions. In particular, the AICD’s Guide notes that effective stakeholder governance requires identification, prioritisation and regular review of the entity’s stakeholders; developing a vision for the board’s role in the entity’s stakeholder governance (which will require engagement with management); engaging with key stakeholders to understand and respond to issues; considering stakeholder voices as part of the board’s decision-making processes; and evaluating the ongoing effectiveness of the entity’s stakeholder governance vision. Given the rise in shareholder activism, stakeholder engagement should be a growing priority for boards. See the AICD’s media release.
Directors’ duties and climate change. As noted in last week’s edition of Boardroom Brief, there is growing consideration of the role of directors’ duties in assessing and disclosing climate related risks. The Centre for Policy Development has published a third opinion from Noel Hutley SC and Sebastian Hartford Davis in their series on directors' duties with regard to climate change. The opinion concludes that evolving market expectations on climate change have considerably elevated the standard of care required to discharge a directors' duty of due care and diligence and highlights the risk of liability for misleading disclosure should there be inconsistency between a company's stated position and ambition on climate risk management, and its internal strategy, plans and actions (so-called “greenwashing”).
ASX consultation on proposed changes to oil and gas reporting requirements. On 16 April 2021, ASX released a consultation paper entitled Proposed changes to the oil and gas reporting requirements in the ASX Listing Rules. The consultation paper summarises the proposed changes to oil and gas reporting requirements for ASX-listed entities. Notably, the proposed changes will prohibit certain types of reporting in relation forecast financial information and disclosure of mean estimates of prospective resources, each of which are derived from an estimate of contingent resources (on the basis that it is potentially misleading to investors to publish such information on such contingent resources, which may not be economically viable). ASX is seeking public consultation on the items raised in its consultation paper by Friday, 28 May, with any consequent changes to the ASX Listing Rules expected to be announced in September 2021 and to take effect on 1 July 2022.
OVER THE HORIZON
Another key role for critical minerals in Australia. A recent KPMG report has added to growing interest in the critical minerals sector by noting that lithium, vanadium, cobalt, graphite and indium will, among other minerals, be essential for the global transition towards renewable energy. The release of the Australian Government’s Resources Technology and Critical Minerals Processing National Manufacturing Priority road map earlier this year, has already elevated the development of a critical minerals production capability as a key plank of Australia’s strategic resilience and national security.