Details of the Financial Framework (Supplementary Powers) Amendment

(Agriculture, Water and the Environment Measures No. 1) Regulations 2022

 

Section 1 - Name

 

This section provides that the title of the Regulations is the Financial Framework (Supplementary Powers) Amendment (Agriculture, Water and the Environment
Measures No. 1) Regulations 2022.

 

Section 2 - Commencement

 

This section provides that the Regulations commence on the day after the instrument is registered on the Federal Register of Legislation.

 

Section 3 - Authority

 

This section provides that the Regulations are made under the Financial Framework (Supplementary Powers) Act 1997.

 

Section 4 - Schedules

 

This section provides that the Financial Framework (Supplementary Powers) Regulations 1997 are amended as set out in the Schedule to the Regulations.

 

Schedule 1 - Amendments

 

Financial Framework (Supplementary Powers) Regulations 1997

 

Item 1 - In the appropriate position in Part 4 of Schedule 1AB (table)

 

This item adds a new table item to Part 4 of Schedule 1AB to establish legislative authority for government spending on an activity to be administered by the Department of Agriculture, Water and the Environment (the department).

 

New table item 532 establishes legislative authority for the Government to provide funding to support the Taskforce for Nature-related Financial Disclosures (TNFD) develop and deliver an international risk management and disclosure framework for organisations to report and act on nature-related risks and opportunities.

 

Formally launched in June 2021, the TNFD is a global initiative which aims to provide financial institutions and corporates with a complete picture of their environmental risks and opportunities. The TNFD is supported by the United Kingdom (UK), the G7 Finance, Climate and Environment Ministers, and the G20 Environment Ministers. The Netherlands and Switzerland are also members.

 

Inspired by the approach and success of the Taskforce on Climate-related Financial Disclosures, the TNFD is developing a framework to help corporates and financial institutions assess, value and manage their impacts and dependencies on nature. The TNFD's overarching objective is to support a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes.

 

On 6 November 2021, the Minister for the Environment, the Hon Sussan Ley MP, announced that Australia will join the TNFD forum along with the UK, France and Switzerland to help unlock natural capital investment from private finance and banking sectors through better understanding and reporting framework. The media release is available at https://minister.awe.gov.au/ley/media-releases/australia-joins-global-moves-value-natural-capital.

 

The announcement was in response to an invitation from the Executive Director of the TNFD for Australia to join the TNFD forum and provide financial support of US$500,000 over two years from 2021-22 through the forum to promote engagement and the important role of natural capital in meeting global targets. Smaller contributions have also been made by the Dutch and Swiss governments which may increase in 2022, and discussions are underway with several other G20 governments and the New South Wales government. 

 

Joining the TNFD at this critical early stage, as a strategic funding partner, allows Australia to influence the TNFD process using its internationally recognised expertise and contributes to ensuring international market approaches are developed in alignment with Australia's unique circumstances. It also signals Australia's support for a new global biodiversity framework which is expected to be adopted at the Fifteenth meeting of the Conference of the Parties to the Convention on Biological Diversity, and aligns with the emerging priorities under discussion between Australia and Singapore relating to the Green Economy Agreement. 

 

The funding to be provided to the TNFD will be sourced from the Natural Capital Metrics Program (NCMP). The 2021-22 Budget provided $4.7 million over three years from 2021-22 for the NCMP to develop a unified, standardised metrics and measurements framework to support informed investment and development of Australia's natural capital. Joining and financially supporting the TNFD directly contributes to the objectives of the NCMP by ensuring that internationally developed frameworks reflect Australian experiences and circumstances.

 

The department will provide a one-off, ad hoc grant to the TNFD to enable beta testing of the framework from 1 March 2022. The grant will be administered in accordance with the Commonwealth resource management framework, including the Public Governance, Performance and Accountability Act 2013 and the Commonwealth Grants Rules and Guidelines 2017. Information about the grant will be made available on the GrantConnect website (www.grants.gov.au), and the grant will be administered by either one of the Commonwealth grants hubs or the department as appropriate.

 

The Minister for the Environment will be responsible for the final decision about the Commonwealth expenditure. The Minister was briefed on how the expenditure could be undertaken by the department and authorised the department to engage with the TNFD secretariat on an appropriate funding commitment not exceeding the amount stipulated in the invitation letter of US$500,000 sourced from the NCMP. The Minister may delegate their powers to make, vary or administer the grant to an appropriate SES officer in the department who has the relevant skills, qualifications and expertise, and is able to perform relevant functions in accordance with the Commonwealth resource management framework.

 

Funding decisions made in connection with the grant will not be subject to an independent merits review as these decisions relate to the allocation of a finite resource from which all potential claims for a share of the resource cannot be met. In addition, as the grant supports the implementation of policy decisions made by the Government, merits review of funding decisions would not be appropriate because the decisions relate to the provision of an ad hoc grant to a certain organisation over other organisations. The Administrative Review Council has recognised that it is justifiable to exclude merits review in relation to decisions of this nature (see paragraphs 4.16 to 4.19 of the guide, What decisions should be subject to merit review?).

 

In addition, the review and audit process undertaken by the Australian National Audit Office provides a mechanism to review Australian Government spending decisions and report any concerns to the Parliament. These requirements and mechanisms help to ensure the proper use of Commonwealth resources and appropriate transparency around decisions relating to making, varying or administering arrangements to spend relevant money.

 

Further, the right to review under section 75(v) of the Constitution and review under section 39B of the Judiciary Act 1903 may be available. Persons affected by spending decisions would also have recourse to the Commonwealth Ombudsman where appropriate.

 

Consultation has occurred in relation to Australia joining and providing funding support to the TNFD. The department has consulted internally and widely across the government entities, including with representatives from the Department of the Treasury (Treasury), the Department of Finance, the Department of Foreign Affairs and Trade (DFAT), the Department of the Prime Minister and Cabinet (PM&C), and the Department of Industry, Science, Energy and Resources.

 

No concerns were raised and representatives from the Treasury, DFAT and PM&C indicated support for Australia to join the TNFD and provide funding support. The Treasury advised that they are comfortable with the proposed approach and consider it consistent with the Treasury's wider strategy on sustainability-related reporting. The Treasury recognises that nature-related reporting metrics and frameworks are an important medium-term issue, and that this is an important opportunity for influence.

 

Funding of $4.7 million for the NCMP was included in the 2021-22 Budget under the measure 'Agriculture 2030' for a period of three years commencing in 2021-22. Details are set out in Budget 2021-22, Budget Measures, Budget Paper No. 2 2021-22 at pages 51 to 55.

 

Funding for this item will come from within existing departmental resourcing for Outcome 1. Details are set out in the Portfolio Budget Statements 2021-22, Budget Related Paper No. 1.1, Agriculture, Water and Environment Portfolio at page 31.

 

Noting that it is not a comprehensive statement of relevant constitutional considerations, the objective of the item references the external affairs power (section 51 (xxix)) of the Constitution.

 

 

External affairs power

 

Section 51(xxix) of the Constitution empowers the Parliament to make laws with respect to 'external affairs'. The external affairs power supports legislation with respect to matters or things outside the geographical limits of Australia.

 

The expenditure to support the TNFD includes supporting activities that occur overseas such as establishing the TNFD in London, UK. Activities will also include reporting back to the TNFD based overseas.

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Financial Framework (Supplementary Powers) Amendment (Agriculture, Water and the Environment Measures No. 1) Regulations 2022

 

This disallowable legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the legislative instrument

 

Section 32B of the Financial Framework (Supplementary Powers) Act 1997 (the FF(SP) Act) authorises the Commonwealth to make, vary and administer arrangements and grants specified in the Financial Framework (Supplementary Powers) Regulations 1997 (the FF(SP) Regulations) and to make, vary and administer arrangements and grants for the purposes of programs specified in the Regulations. Schedule 1AA and Schedule 1AB to the FF(SP) Regulations specify the arrangements, grants and programs. The powers in the FF(SP) Act to make, vary or administer arrangements or grants may be exercised on behalf of the Commonwealth by Ministers and the accountable authorities of non-corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013.

 

The Financial Framework (Supplementary Powers) Amendment (Agriculture, Water and the Environment Measures No. 1) Regulations 2022 amend Schedule 1AB to the FF(SP) Regulations to establish legislative authority for the Government to provide funding to support the Taskforce for Nature-related Financial Disclosures (TNFD) develop and deliver an international risk management and disclosure framework for organisations to report and act on nature-related risks and opportunities.

 

Formally launched in June 2021, the TNFD is a global initiative supported by the United Kingdom (UK), the G7 Finance, Climate and Environment Ministers, and the G20 Environment Ministers. The Netherlands and Switzerland are also members. Inspired by the approach and success of the Taskforce on Climate-related Financial Disclosures, the TNFD is developing a framework to help corporates and financial institutions assess, value and manage their impacts and dependencies on nature. The TNFD's overarching objective is to support a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes.

 

On 6 November 2021, the Minister for the Environment, the Hon Sussan Ley MP, announced that Australia will join the TNFD forum along with the UK, France and Switzerland to help unlock natural capital investment from private finance and banking sectors through better understanding and reporting framework. The announcement was in response to an invitation from the Executive Director of the TNFD for Australia to join the TNFD forum and provide financial support of US$500,000 through the forum to promote engagement and the important role of natural capital in meeting global targets.

 

The financial support to be provided to the TNFD will be sourced from the Natural Capital Metrics Program (NCMP). The 2021-22 Budget provided $4.7 million over three years from 2021-22 for the NCMP to develop a unified, standardised metrics and measurements framework to support informed investment and development of Australia's natural capital.

 

Human rights implications

 

This disallowable legislative instrument does not engage any of the applicable human rights or freedoms.

 

Conclusion

 

This disallowable legislative instrument is compatible with human rights as it does not raise any human rights issues.

 

 

 

 

Senator the Hon Simon Birmingham

Minister for Finance