This is a service specifically targeted at the needs of busy non-executive directors (NEDs). We aim to give you a ‘heads up’ on the things that matter for NEDs in the week ahead – all in two minutes or less.

In this edition, we discuss a study published by the Australian Institute of Company Directors (AICD) on the climate change concerns of Australian directors, the adoption of climate-related disclosure rules by the U.S. Securities Exchange Commission (SEC), the publication by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) of final rules and further guidance on the Financial Accountability Regime (FAR), and the Takeovers Panel’s reasons for its decision to decline to conduct proceedings on application from Ignite Limited (Ignite) in relation to its affairs.

In Over the Horizon, we consider the resurging discussion on nuclear power and its place (if any) in Australia.

GOVERNANCE

AICD publishes study on the climate change concerns of Australian directors. On 5 March 2024, the AICD published its Climate Governance Study 2024: Moving from vision to action, which reports on the results of an online survey of AICD members, along with interviews and roundtable discussions with 24 senior non-executive directors. The study, which was undertaken in collaboration with advisory and investment firm Pollination, reveals that many directors see climate-related risks as a material governance issue, and a clear majority also consider that their boards should pay more attention to the subject. With respect to listed companies, the study highlights the board’s role as a mediator of short and long-term interests as directors grapple with the challenge of balancing transition efforts and investments in a world with diverging stakeholder interests. Overall, 80% of directors reported that they are concerned about climate-related risks, and 32% of boards have adjusted their organisational strategies in response to climate-related risks and opportunities. Notably, of the directors who reported being most concerned about climate-related risks, 70% also saw opportunities in addressing them. AICD Managing Director and CEO, Mr Mark Rigotti, stated that “[c]limate change is no longer just about compliance or reputation, it’s now accepted as a key strategic issue, presenting both risks and opportunities for organisations”. See Climate Governance Study 2024 and AICD media release.

REGULATION

SEC adopts climate-related disclosure rules. On 6 March 2024, the SEC adopted rules amending US securities laws to enhance and standardise climate-related disclosures by public companies and companies undertaking a public offering. Among other things, the rules will require the disclosure of information about climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, a company’s business strategy, results of operations, or financial condition in the short-term (i.e., the next 12 months) and in the long-term (i.e., beyond the next 12 months). Notably, only companies which are classified as “large accelerated filers” or “accelerated filers” (generally, companies with a public float of US$75 million or more) that are not otherwise exempted will be required to provide information about material Scope 1 and/or Scope 2 emissions. These companies will also be required to file attestation reports in respect of those emissions, with compliance dates to be phased in over the next decade. As discussed in last week’s edition of Boardroom Brief, directors should keep an eye on international developments in this space as concerns over the introduction of mandatory sustainability reporting in Australia increase. See SEC media release.

ASIC and APRA publish final rules and further guidance for the FAR. On 8 March 2024, ASIC and APRA released the final rules and further guidance to support the financial services industry in implementing the FAR. The materials released include: (1) the Regulator Rules, which prescribe information for inclusion in the FAR register of accountable persons; (2) the Transitional Rules, which prescribe information to be provided by authorised deposit-taking institutions (ADIs) in relation to existing accountable persons when transitioning to the FAR; (3) a document describing the key functions of ADIs; and (4) reporting form instructions to assist banking entities in providing information required by the regulators. These materials complement the information package released by the regulators on 3 October 2023, which was discussed in a previous edition of Boardroom Brief. The FAR aims to improve the risk and governance cultures of financial institutions, and will come into force for the banking industry on 15 March 2024 and for the superannuation and insurance industries on 15 March 2025. See ASIC media release and FAR information package.

LEGAL

Takeovers Panel publishes reasons for declining to conduct proceedings on application from Ignite in relation to its affairs. On 8 March 2024, the Takeovers Panel published its reasons for declining to conduct proceedings on an application dated 6 February 2024 from Ignite in relation to its affairs. As discussed in a previous edition of Boardroom Brief, Ignite’s application concerned the sale of shares in Ignite by Octavium Capital Investments Pty Ltd (Octavium) to Graham Newman Pty Ltd (GNPL) in circumstances where the number of shares sold by Octavium was the same number of shares acquired under Ignite’s entitlement offer. The Panel considered that the evidence before them was insufficient to establish that Octavium and GNPL were associates or that the dealings between Octavium and GNPL were uncommercial. The Panel further considered that any technical breaches of substantial holder provision by Octavium and GNPL were substantially corrected by subsequent disclosures and that, in the circumstances, further enquiries into the matter were not necessary. See Ignite Limited [2024] ATP 3.

OVER THE HORIZON

A nuclear suggestion. Discussion on the place of nuclear power in Australia has ramped up in the last week, with the leader of the Opposition, Mr Peter Dutton, proposing the construction of nuclear power stations on the sites of retired coal stations. All options appear to be on the table, with both large-scale and small modular reactors being considered to firm-up Australia’s baseload electricity requirements and support Australia’s drive towards net zero by 2050. Shadow Energy Minister, Mr Ted O’Brien, has also stated that a nuclear reactor could be built in Australia within a decade – a comment which has been met with disdain by Labor ministers. It is understood that the Coalition is in the “advanced stages” of finalising its renewable energy policy, which is expected to be major talking point in the lead-up to the 2025 federal election. While concerns remain prevalent, the public may be increasingly receptive to the use of nuclear reactors as a replacement for existing coal-fired power generation. A poll by The Australian reported that 55% of Australian voters supported the building of small modular nuclear reactors, and a poll by Essential Research reported that 50% of Australians support the development of nuclear power plants, up from 39% in 2019. Public debate on the role of nuclear power and, more broadly, the means by which Australia will reach its net zero goals will be sure to shape Australia’s renewable energy policy in the lead-up to the 2025 federal election and beyond.