Australia Enacts Historic Law Increasing Companies’ Climate Risk Disclosures and Strengthening Global Alignment and Transparency

• Assessments of climate resilience under 1.5°C and 2.5°C warming scenarios are mandated by new reporting requirements.
• It is imperative that organizations examine and connect their current climate risk strategy with this dual-scenario reporting.
• Beginning in January2025, investors—including asset owners—must get ready for more stringent climate reporting obligations.

A new era of required climate risk reporting has begun with the passage of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 by the Australian Senate. Large Australian corporations, both listed and unlisted, will have to start providing standardized climate information starting in 2025. The investor community has applauded this decision as a big step toward accountability and openness.

As stated in the Climate Change Act 2022, a crucial component of the new regime is the obligation for businesses to provide climate resilience assessments based on both 1.5°C and 2.5°C warming scenarios. It is essential for businesses to assess and synchronize their current climate risk strategy with this dual-scenario reporting.

The Australian Sustainability Reporting Standard, which will closely resemble the International Financial Reporting Standards (IFRS), is anticipated to be finalized soon by the Australian Accounting Standards Board (AASB).

Following the bill’s Royal Assent, Australia’s business watchdog, ASIC, has stated that it will publish guidelines about the new reporting requirements. In order to supervise compliance and handle relief requests under the new duties, ASIC will also form a staff.

The new rules, however, do not only apply to businesses. By 2027, investors—especially asset owners with more than $5 billion in assets under management—will also have to disclose any climate-related risks. This extension underscores the broader market’s role in the transition to a low-carbon economy. 

Even with widespread support, there are still obstacles. It will be necessary for asset owners and managers to obtain trustworthy sustainability data from their portfolio firms, some of which could be located in countries that have not ratified the ISSB criteria, which might make reporting more difficult.

ASIC published a report on its recent greenwashing interventions, which included federal court actions and fines totaling over $123,000, concurrently with the bill’s passing. 

Companies and investors alike need to get ready for the heightened scrutiny and obligations that come with this historic law as Australia moves forward with it. Transparency paves the way for decarbonization, and the new system establishes a benchmark for regional climate reporting going forward.