As global awareness of climate change intensifies, so does the call for greater transparency in corporate environmental practices. In Australia, the introduction of new mandatory climate disclosure requirements marks a significant step towards holding companies accountable for their environmental impact. This development follows the recent passing of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 by the Australian Government, which proposes a new mandatory climate-related financial disclosure regime. The Bill outlines reporting obligations over a four-year period, divided into three groups based on criteria such as revenue, assets, number of employees, and existing climate reporting obligations. Companies are encouraged to stay updated with the Australian Securities and Investments Commission (ASIC) and other regulatory bodies to ensure compliance with the latest requirements.
This article provides a comprehensive overview of these new requirements, who is affected, the timeline for implementation, and how BoardRoom can assist in ensuring compliance.
What Is the New Mandatory Climate Disclosure?
Mandatory climate-related financial disclosures are a set of requirements imposed by the Australian Government to ensure that businesses are transparent about the financial impacts of climate change on their operations. These disclosures must be included in a company’s annual financial report and cover key areas such as governance, strategy, risk management, and specific metrics related to climate change.
Designed to enhance the country’s reputation as a sustainable investment destination, this initiative marks Australia’s alignment with global practices by implementing disclosure standards that reflect the requirements of the International Sustainability Standards Board (ISSB) and the Task Force on Climate-related Financial Disclosures (TCFD).
Timeline Table for Implementation
The Australian Government has adopted a phased approach to implementing these requirements. The timeline is structured to give businesses ample time to prepare and comply with the new standards.
| Group | First annual reporting period starting on or after | Criteria |
|---|---|---|
| Group 1 | 1 January 2025 |
Entities meeting at least two of the following:
Included in Group 1 are all entities that are required to be registered corporations under the NGER Act and that meet the NGER publication threshold. |
| Group 2 | 1 July 2026 |
Entities meeting at least two of the following:
Included in Group 2 are all entities that are NGER reporters and not captured under Group 1, as well as asset owners with AU$5 billion or more in assets under management, including assets of all entities it controls. |
| Group 3 | 1 July 2027 |
Entities meeting at least two of the following:
|
Who Is Included?
The new requirements apply to large entities that are required to lodge annual reports under Chapter 2M of the Corporations Act. This includes both listed and unlisted companies, financial institutions, registrable superannuation entities, and registered investment schemes. Asset owners, such as registrable superannuation entities with over AU$5 billion in funds under management, are also included.
Additionally, entities that fall under the annual reporting obligations of the Corporations Act and are subject to emissions reporting under the National Greenhouse and Energy Reporting Act 2007 (NGER Act), regardless of size, must comply with these new requirements.
Who Is Exempted?
Small and medium-sized businesses that fall below the size thresholds outlined above are exempt from these new mandatory climate disclosures. Entities that are exempt from lodging financial reports under Chapter 2M of the Corporations Act are also excluded, including those with exemptions through ASIC class orders or that are registered with the Australian Charities and Not-for-profits Commission (ACNC).
What Reporting Content Is Required?
The mandatory climate-related disclosures must include detailed information in several key areas:
- Governance: Disclosure of the organisation’s governance structure regarding climate-related risks and opportunities, including the board’s oversight and management’s role in assessing and managing these risks.
- Strategy: An outline of the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning.
- Risk Management: A description of how the organisation identifies, assesses, and manages climate-related risks.
- Metrics and Targets: Disclosure of the metrics used to assess climate-related risks and opportunities, including Scope 1, 2, and 3 greenhouse gas emissions, and the targets used by the organisation to manage climate-related risks and opportunities.
Directors’ Declaration
Under the new regulations, directors must declare that the climate-related financial disclosures are prepared following Australian standards and accurately reflect the company’s financial position. The climate statements in the sustainability report will need a directors’ declaration stating compliance with the Corporations Act and Australian Accounting Standards Board (AASB) standards. During the first three years, the declaration will only require a statement that the entity has taken reasonable steps to ensure compliance, a lower threshold than usual. While this phased approach introduces some uncertainty, particularly regarding what constitutes “reasonable steps,” it is an improvement over the initial draft, which demanded a full declaration from the outset without prior assurance. This phased approach provides companies with enough time to ensure they can meet the standards fully in the future, rather than being required to do so immediately.
Navigating the Future of Corporate Climate Responsibility
The introduction of mandatory climate-related financial disclosures marks a significant shift in the regulatory landscape for Australian businesses. By starting your preparations early and leveraging the expertise and tools offered by BoardRoom, you can navigate this transition smoothly and position your business as a leader in sustainability and transparency. For a deeper understanding of climate disclosure and how to avoid greenwashing, check out our earlier article on understanding climate reporting and greenwashing.
How Can BoardRoom Help?
Navigating these new mandatory climate disclosure requirements can be challenging, but BoardRoom is here to assist every step of the way. Our services are designed to ensure seamless compliance while helping you capitalise on the potential opportunities that these disclosures present.
- Data Collection and Reporting: We offer comprehensive solutions to assist with the collection, verification, and reporting of essential climate-related data, ensuring that your disclosures are accurate and compliant.
- Strategic Advisory: Our team of experts provides insights and strategies to manage climate risks effectively, helping you not only meet but exceed the new standards.
- Advanced Software Solutions: BoardRoom’s ESG reporting software streamlines the data collection and reporting process, offering a seamless and efficient solution to your compliance needs.
For more information on how BoardRoom can support your business through these new regulatory changes, contact us today and learn more about our ESG access service.
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