Graham Perrett (Moreton, Australian Labor Party) Share this | Hansard source

I rise in support of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024. The reforms in this bill are necessary, significant and future-thinking. They focus on two key areas: mandatory climate reporting targets for large businesses and financial market infrastructure protection. These modernising reforms are important because we need to position the Australian economy for future economic opportunities, and building a more robust system is a key foundation for that.

The reform of financial market infrastructure protection is long overdue, and we can thank the former government for their decade of inaction on that. This infrastructure is the framework for crucial financial system operations such as Commonwealth and state government debt, security trading, access to liquidity and risk-management products, and the RBA's implementation of monetary policy. These changes were recommended in the 2014 financial system inquiry. In 2020 the Council of Financial Regulators again recommended giving the Reserve Bank of Australia the capacity to intervene and quickly resolve crises impacting critical financial market infrastructure. Given the GFC was a recent memory at the time, it is, quite frankly, astounding that it took the former government six years to even agree with the recommendations, and it won't surprise anyone here that they never actually got around to implementing them. That was left to a Labor government, and today the Albanese Labor government is taking action to strengthen the regulatory arrangements for Australian financial infrastructure, including the RBA and ASIC.

It's significant as well that these reforms follow best-practice international standards that emerged post-GFC, and are in line with recommendations from the G20 and the International Monetary Fund. Put simply, the amendments will ensure the RBA has the power to ensure continuity of clearing and settlement services during a crisis such as an IT system failure at the ASX, a cyber-attack—heaven forbid—or major international market turmoil. Clearing and settlement facilities settle transactions and securities such as bonds and equities, and in derivatives such as options and futures. These crucial functions are necessary for financial stability. A failure of a clearing and settlement facility would significantly disrupt our financial markets.

These reforms will ensure that the RBA can act swiftly during a crisis. There will be checks and balances in place. These powers can be enacted only when one or more conditions for resolution are met. These are distinct from the daily operational regulatory oversight and risk mitigation carried out by the RBA. The RBA will be also be able to provide up to $5 billion in support as a last resort to ensure the continuity of clearing and settlement services and to avoid financial system instability—avoiding fear effectively. In such cases, approval would be required by the Treasurer and the Minister for Finance, and the funds would be recoverable.

The amendments will also ensure that the RBA has the regulatory power to help prevent crises occurring by extending the requirements on domestic and foreign financial market licensees. These regulatory changes will provide certainty for industry, as the RBA will be able to support the market and reduce the risk of economic damage.

The bill includes further strengthening of clearing and settlement facilities by providing greater licensing and supervision powers to ASIC and the RBA. These include the power to give direction, to ensure fit, proper and competent person requirements, and to ensure that changes are approved by the minister or ASIC. The final regulatory changes involve transferring the minister's current daily operational supervisory powers to ASIC and the RBA.

The second major part of this bill's reforms is to implement mandatory climate reporting requirements for big companies. This reform is a key component of Labor's vision for an Australia that has cleaner, cheaper and more reliable energy. The development of standardised and internationally aligned requirements for large companies to report climate-related risks and opportunities is another Labor election commitment that we are delivering on. The establishment of a climate risk disclosure framework will have many benefits for investors: it gives them transparency when investing in new opportunities as part of the net zero transformation; it will enhance our attractiveness when it comes to international capital investors who are keen to support Australia's energy transformation and, let's be honest, to make a buck; and, importantly, it will keep climate-related plans, risks, opportunities and accountability front of mind for large business and financial institutions. As we all know, capital have known about this risk for a very long time. They've looked on with surprise to see Australia fighting those climate wars for a decade, but capital understood risk. What this means in practice is that businesses will have to develop and report on plans to reduce emissions and to identify the effects that climate change could have on their physical assets. They will also have to report on the opportunities for expansion that the net zero transformation may present. This will support large businesses to prepare for this change.

The new requirements will start on 1 January next year for Australia's largest listed and unlisted companies and unlisted financial institutions. This means companies that meet two of the three following criteria: they have a consolidated revenue of more than $500 million—so not just the local corner shop—and/or consolidated gross assets of more than $1 billion and more than 500 employees. These are large businesses. We will then take a phased approach over 2026 and 2027 to bring more businesses in line with these reporting requirements. This lead-in time for preparation and then the subsequent phased approach will mean that businesses can build their internal capability to deliver high-quality reporting.

By 2027-28, all businesses with revenue of over $50 million or gross assets of more than $25 million and more than 100 employees will be required to report in line with the announced framework. As part of the adjustment period, the government will modify liability settings under the Corporations Act for a three-year period—the carrot rather than the stick. During this time, the regulator can take action against misleading and deceptive conduct only. The reporting requirements will be both comprehensive and ambitious. This is a key part of sustaining and growing Australia's solid reputation as a destination for international investment—and we need international investment to support our transition to net zero.

As the 13th-largest economy in the world, we need to lead. There are 187 other countries after us who are looking to countries like Australia to see how you can do it, especially when you're exposed to fossil fuels as Australia is. That's why the mandatory reporting will include information on scope 3 emissions. People might not know, but scope 3 emissions are indirect emissions that occur outside of the core operations of a business. For many businesses, these are the emissions that occur within the supply or value chains rather than being generated directly. The reporting requirements will assist businesses with understanding the risks associated with scope 3 emissions.

We know that industry broadly supports the mandatory climate reporting initiative, because we've consulted widely with industry, investors, academics and regulators. We also understand that the assurance market for sustainability disclosures is emerging, so full assurance will not be mandatory until 1 July 2030. That's why we are bolstering the Australian Auditing and Assurance Standards Board to ensure that the assurance pathway responds to changes in industry capability and expertise.

The Albanese Labor government is committed to positioning the Australian economy and Australian businesses for a changing future. That's the best way to secure the future for Australians. It's vital to get this work underway so it can keep in line with international capital market expectations. We know that there are challenges with climate change, but we also know that there is potential for well-targeted investment in the net zero transformation. The reforms in this bill are part of Labor's broad sustainable-finance agenda. This will mean the establishment of a coherent and complete suite of regulatory powers which will provide stability and efficiency. They will ensure that we manage the risks and, more importantly, the opportunities associated with dangerous climate change. I commend the bill to the House.

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