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ASX updates corporate governance guidelines to expand sustainability reporting

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28 Mar 2014

The Corporate Governance Council of the ASX Group, one of the stock exchanges of Australia, has released an updated edition of its 'Corporate Governance Principles and Recommendations', which outline the principles and recommendations about corporate governance practices that a ASX listed entity must meet on a "comply or explain" basis. The revised guidelines include enhanced recommendations for disclosure of material exposures to economic, environmental and social sustainability risks, including how those risks are managed.

Prior editions of the guidelines have contained general recommendations around sustainability risks and suggested that listed entities "should consider making" more detailed disclosures. The new recommendations now require disclosure where material exposures to risks exist, which is defined as "a real possibility that the risk in question could substantively impact the listed entity's ability to create or preserve value for security holders over the short, medium or long term".

The guidelines note that the revised recommendation is not requiring a listed entity to publish sustainability reports, but notes that the recommendation could be met by cross-referencing to any such report prepared by the entity. Although the document references various sources of guidance on sustainability reporting, such as the Global Reporting Initiative (GRI) guidelines, International <IR> Framework published by the International Integrated Reporting Committee, OECD Guidelines for Multinational Enterprises and CDSB Framework of the Climate Disclosure Standards Board (CDSB), it does not require compliance with any particular framework. The 'Consultation Response' document accompanying the revised guidelines notes that "the intention behind [the] recommendation... is to provide listed entities with an avenue to disclose their approach to sustainability risks without the onerous requirement of producing a sustainability report pursuant to any particular standards or guidelines".

Various other changes have also been made to the principles and recommendations, including measures related to the appointment, responsibilities and professional development of directors, providing information about governance on an entity's website, information about internal audit, and attendance of external auditors at annual general meetings (AGMs).

The revised guidelines are the result of a public consultation process that formally commenced in August 2013, and are effective for full financial years commencing on or after 1 July 2014. However, entities listed on the ASX are encouraged to adopt the revised guidelines earlier.

The revised guidelines are available on the ASX website, www.asx.com.au (under ASX news, media releases).

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