CANBERRA, AAP – Australia needs to step up on climate change or face the financial and investment consequences, the country’s top economic bureaucrat has warned.

“There may be aspects that do not align with Australia’s national interest,” Treasury Secretary Steven Kennedy told a briefing on Friday.

“We do not have to like what’s happening but we do have to be engaged and involved.”

He acknowledged powerful forces are now at play in sustainable investment, disclosure and international capital flows.

“Australia will need to take further steps to meet these expectations,” he said.

Mr Kennedy said he began working on these policy issues a decade ago and it was “pleasing” financial regulators had now stepped up their activity.

The United Nations COP26 climate conference held in Glasgow earlier this month gave some important pointers, he said.

A new standards board, the International Sustainability Standards Board (ISSB), was created this month to meet demand from international investors for companies to report on climate and other environmental, social and governance (ESG) matters.

Australian officials will be involved in developing a global baseline of sustainability-related disclosure standards for investors and other capital market participants.

Dr Kennedy said the new board will build on the Task Force on Climate-Related Financial Disclosures regime of voluntary disclosure recommendations for companies regarding financial risks.

He said credible alternatives will also be important for Australia as the weight of finance and international capital flows shift.

So far, Australia has been a relatively strong performer on climate financial disclosure, he said.