Net zero, nature positive Australian companies

The Net zero, nature positive Australian companies project aims to:

  • Empirically track corporate responses to the rapidly developing regulatory and market context in relation to climate change and biodiversity loss.
  • Assess whether these responses are likely to lead to robust corporate risk management and improved corporate climate and environmental performance.
  • Propose changes to regulatory frameworks to support improved corporate risk management and environmental performance.

Commencing in February 2024, the project is being undertaken by an interdisciplinary team of researchers from Monash Business School's various departments and centres, including the Department of Business Law and Taxation, Department of Accounting, Department of Economics, and the Monash Centre for Financial Studies.

Researchers

Background

Worldwide, companies are facing increasing regulatory pressure to address risks posed by climate change and reduce greenhouse gas emissions in line with the ‘net zero’ goal of the Paris Agreement.

Regulatory influences include new climate-related disclosure obligations, best practice industry standards for climate targets and transition plans, increased investor engagement and advocacy on climate issues, and growth in carbon markets providing companies with flexible pathways to achieve net zero emissions.

Following the adoption of the Kunming-Montreal Global Biodiversity Framework in 2022 under the International Convention on Biological Diversity, companies also face increased pressure to address risks posed by biodiversity loss and reduce their negative impacts on nature in line with emerging ‘nature positive’ goals.

Regulatory influences on companies' approaches to nature are developing along a similar trajectory to the net zero goal, including disclosure expectations and standards, target-setting platforms, and emerging markets for biodiversity credits.

Corporate responses to these pressures and opportunities are rapidly evolving. Many companies have set ambitious net zero emissions targets and provide climate risk disclosures, including transition plans. Some leading companies are now setting biodiversity targets and disclosing nature-related risks.

However, there are concerns about greenwashing and heavy reliance on environmental offsets, which detract from managing risks and reducing adverse impacts in a timely way. There are also concerns that increased regulatory pressure may have a chilling effect on some companies, leading to a green hush.

Method

The study adopts a mixed-method research approach across legal, economic and accounting disciplines, involving doctrinal legal research and empirical investigation.

Doctrinal research is already underway in the form of a regulatory and market study which maps the intersecting areas of:

  • Corporate law obligations and associated regulatory guidance, which address the disclosure and management of climate and nature-related financial risks. These obligations are developed and enforced via litigation and other enforcement activities targeting companies on their approach to climate and nature-related risks and impacts.
  • Legal obligations in environmental and climate change law, such as environmental impact assessment and approval frameworks and emissions reduction obligations embodied in emissions trading schemes, which seek to reduce adverse climate or biodiversity impacts associated with company activities.
  • Environmental market schemes for carbon and biodiversity, which provide flexible pathways for companies to mitigate adverse impacts.
  • Advocacy and engagement activities undertaken by investors, civil society, and other external stakeholders focused on aligning company risk management with net zero and nature positive goals.
  • Voluntary industry standards, guide company target-setting, transition planning and the use of carbon or biodiversity credits.

There have been several recent regulatory developments within each of these categories, which this project will track and assess. These include:

  • New climate reporting obligations under the Corporations Act 2001 (Cth) were introduced to the Australian Parliament in 2024.
  • The recently revised Australian Carbon Credit Scheme and new Nature Repair Market.
  • The Australian Government’s 2023 reforms to the Safeguard Mechanism under the National Greenhouse and Energy Reporting Scheme.
  • Guidance and metrics emerging from the Taskforce on Nature-related Financial Disclosures

This regulatory study will underpin a series of linked empirical studies, co-designed with a stakeholder advisory panel comprised of government policymakers and regulators, Australian and international standard setters for financial and sustainability reporting and peak industry bodies.

Outputs

Engagement

Acknowledgements

This project is supported by a Monash Business School Impact Labs Engagement and Outreach Grant.

In designing this project, Green Lab met with external stakeholders, including the Australian Government Department of Climate Change, Energy, the Environment and Water, Australian and international standard setters for financial and sustainability reporting, including the International Accounting Standards Board, International Sustainability Standards Board and Australian Accounting Standards Board, as well as peak industry body the Australasian Council of Superannuation Investors.