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- New reporting standards require climate resilience assessments under both 1.5°C and 2.5°C warming scenarios.
- This dual-scenario reporting is crucial for companies to evaluate and align their existing climate risk strategies
- Investors, including asset owners, must prepare for stricter climate reporting duties starting January 2025.
Australia’s Senate has passed the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, setting the stage for a new era of mandatory climate risk disclosures. Starting in 2025, large Australian companies—both listed and unlisted—will be required to provide standardized climate information, a move welcomed by the investor community as a significant step toward transparency and accountability.
“This legislation offers the clarity and certainty needed to support the net-zero transformation,” said Treasurer Jim Chalmers. He emphasized that these reforms will bolster Australia’s reputation as a prime destination for international capital.
A key element of the new regime is the requirement for companies to disclose climate resilience assessments based on both 1.5°C and 2.5°C warming scenarios, as outlined in the Climate Change Act 2022. This dual-scenario reporting is crucial for companies to evaluate and align their existing climate risk strategies.
The Australian Accounting Standards Board (AASB) is expected to soon finalize the Australian Sustainability Reporting Standard, which will align closely with the International Financial Reporting Standards (IFRS). “These standards will ensure that Australia’s reporting framework remains competitive on the global stage,” Chalmers added.
ASIC, Australia’s corporate watchdog, has announced plans to release guidance on the new reporting duties once the bill receives Royal Assent. ASIC will also establish a team dedicated to overseeing compliance and addressing relief claims under the new obligations.
However, the new regulations are not limited to corporate entities. Investors, particularly asset owners with more than $5 billion under management, will also be required to report their climate risks by 2027. This extension underscores the broader market’s role in the transition to a low-carbon economy. Louise Davidson, CEO of the Australian Council of Superannuation Investors (ACSI), noted, “A universal reporting framework will enhance comparability and comprehensibility across the market.“
Despite the broad support, challenges remain. Asset owners and managers will need to source reliable sustainability data from their portfolio companies, some of which may be in jurisdictions that do not adopt the ISSB standards, potentially complicating their reporting efforts.
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Coinciding with the bill’s passage, ASIC released a report on its recent greenwashing interventions, which included federal court proceedings and over $123,000 in fines. ASIC Commissioner Kate O’Rourke urged companies to “use verifiable, precise language when making ESG claims” and to ensure that sustainability-related information is accurate and easily understood by investors.
As Australia moves forward with this landmark legislation, companies and investors alike must prepare for the increased scrutiny and responsibilities that come with it. The road to decarbonization is paved with transparency, and the new regime sets the standard for future climate reporting in the region.