• ASIC says Australia’s first mandatory sustainability reports show stronger climate-related financial disclosure than earlier voluntary reporting.
• The regulator warned companies against disclaimers that conflict with statutory reporting rules, saying they may confuse or mislead users.
• Australia is also consulting on reforms that could remove some smaller companies from annual financial and sustainability reporting obligations.

Sydney regulators have begun testing Australia’s new sustainability reporting regime in practice, as the country’s largest companies file their first climate-related financial disclosures under compulsory rules.

The Australian Securities and Investments Commission said its early review of sustainability reports under Chapter 2M of the Corporations Act 2001 shows a clear rise in both the volume and quality of climate-related financial information in the market.

Australia’s mandatory sustainability reporting regime began in 2025. It is designed to improve the quality, consistency and comparability of climate-related financial disclosures. The rules apply in phases, starting with the largest entities in Group 1 for financial years beginning on or after 1 January 2025.

Some Group 1 entities with financial years ending 31 December 2025 have now lodged their first sustainability reports with ASIC. The regulator’s early observations are based on a subset of those reports.

ASIC said standardised requirements are already improving market discipline. It also praised reports that used tables, diagrams and other visual tools to explain complex climate information.

Early Gaps Point to Governance Risk

ASIC’s review focused on whether reports give investors and other users decision-useful information that complies with the Corporations Act and AASB S2 Climate-related Disclosures.

The regulator welcomed the effort from preparers, but it also identified several areas where companies need to improve before the 30 June 2026 reporting season.

A key concern is the use of disclaimers. ASIC said disclaimers that conflict with the statutory framework and objectives of Chapter 2M sustainability reporting may confuse or mislead users and are not permitted.

That warning matters for boards and disclosure committees. Climate reporting is no longer a voluntary communications exercise. It now sits inside a formal financial reporting framework, with legal duties attached.

ASIC also reminded companies that the “reasonable and supportable” information used to identify climate-related risks includes information about “past events, current conditions and forecast future conditions.”

That means companies cannot assess climate exposure only through backward-looking data. They need to explain how current conditions and forward-looking scenarios affect risk, strategy and financial position.

Judgements, Targets and Cross-References Under Scrutiny

ASIC said companies should provide clear and proximate disclosure of relevant judgements, assumptions and areas of measurement uncertainty.

This is a practical issue for investors. Climate data often depends on assumptions about policy, technology, supply chains, asset lives and future demand. If those assumptions sit too far from the related disclosure, users may struggle to understand the financial implications.

ASIC also warned that extra climate information must not obscure material climate-related financial information. For companies that already publish broad sustainability content, this creates a clear discipline. More detail is not always better if it clouds the core financial story.

RELATED ARTICLE: ASIC Releases Sustainability Reporting Modules for Smaller Companies

Cross-referencing is another area under review. ASIC said entities that refer to information outside the sustainability report must still meet disclosure requirements.

The regulator also clarified how companies should assess climate-related targets. Under AASB S2, climate-related targets include those an entity must meet by law or regulation. That includes greenhouse gas emissions targets such as Australia’s Safeguard Mechanism.

Budget Reforms Could Narrow the Reporting Net

ASIC’s review lands as the Australian government considers reducing reporting burdens for smaller businesses.

Alongside the 2026 Budget, the government proposed reforms expected to reduce regulatory burden by A$10.2 billion per year once fully implemented. The package includes consultation on climate-related reporting, including “setting clearer boundaries on supplier information requests, to reduce costs and complexity, particularly for small businesses.”

Australia’s current reporting rollout covers large and medium-sized companies first. Smaller companies are set to enter the regime in 2027 if they meet two of three thresholds: 100 or more employees, A$50 million in revenue, or A$25 million in assets.

The new proposal would double the revenue and asset thresholds for that smaller company group to A$100 million and A$50 million, while keeping the employee threshold at 100.

According to the Budget summary, “Australian businesses that cease to meet the thresholds due to this increase would no longer need to lodge an annual audited financial report, directors’ report or sustainability report.”

The government also plans to consult on how concepts such as “undue cost or effort” should apply, whether assurance settings need adjustment, and how supplier information requests should be limited.

What Executives Should Take Away

For boards, CFOs and sustainability leads, ASIC’s early message is direct. Climate disclosure is becoming more consistent, but the regulator expects substance over boilerplate.

Companies preparing for the 30 June 2026 reporting season should tighten governance around assumptions, targets, disclaimers and cross-referenced material. They should also prepare for closer engagement with ASIC, which will continue reviewing 31 December 2025 reports over the coming months.

Final observations are expected in the second half of 2026. By then, Australia may also have a clearer view of how far it wants to balance disclosure quality with regulatory burden. That balance will shape not only domestic reporting costs, but also Australia’s credibility in global climate finance and corporate accountability.

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