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Super funds different on climate financial reporting

Mike Taylor14 October 2024
AXA IM moves to increase carbon reduction targets

Superannuation funds are more than willing to sign up to internationally aligned standards for climate-related financial reporting but want their status to be clearly understood.

In a submission to the Australian Accounting Standards Board consultation around climate-related disclosures, the Association of Superannuation Funds of Australia (ASFA) reinforced the unique attributes of superannuation funds and therefore the need for well-targeted examples of how they should report.

It pointed out that the current standards “are designed primarily where a reporting entity is a for-profit, private-sector issuer of capital, and where the end-users of the reporting are ‘primary users of general-purpose financial reports’”.

“Note, that with respect to for-profit private sector entities, the objective of general-purpose financial reporting (as defined in the AASB’s Conceptual Framework for Financial Reporting), is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity. Those decisions involve decisions about:

  • buying, selling or holding equity and debt instruments;
  • providing or settling loans and other forms of credit;
  • or exercising rights to vote on, or otherwise influence, management’s actions that affect the use of the entity’s economic resources.

“By this definition, primary users are typically wholesale financial institutions that make decisions regarding the provision of new debt and equity funding to corporate entities. In Australia, the intention is to apply the IFRS Sustainability Disclosure Standards to superannuation funds, which differ in form from the typical private sector corporate entity (that is, a for-profit private sector entity that issues equity and/or debt in order to fund its own operations).”

“Superannuation funds – the primary institutional arrangement within the superannuation industry – invest in equity or debt-based assets on behalf of their individual members. Further, around three-quarters of assets under management within the superannuation industry are held by funds that can be defined as ‘not-for-profit’. Within the broader superannuation supply chain – which includes administrators, asset custodians and fund managers – business models can also differ from the typical private sector corporate entity.”

“The ISSB has acknowledged potential challenges faced by some entities in interpreting the standards. For example, IFRS S1 states that ‘If entities with not-for-profit activities in the private sector or the public sector apply this Standard, they might need to amend the descriptions used for particular items of information when applying IFRS Sustainability Disclosure Standard’,” it said.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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