Mandatory Climate Disclosure Laws to Take Effect in Australia
Australia has now officially passed laws that will introduce a mandatory climate-related financial disclosure regime from 1 January 2025. This is one of the most significant reforms to corporate financial reporting in Australian history.
On 17 September 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 ("Act") received Royal Assent. With this, the mandatory climate-related financial disclosure regime that has been under consideration by the Australian Parliament since March 2024 is now confirmed.
The regime will commence on 1 January 2025, with many entities required to comply with the regime's reporting requirements from that date and with phased implementation for other entities in 2026 and 2027.
The regime has been analysed comprehensively in our April 2024 Commentary, "Australia's Climate Disclosure Regime Moves Closer to Implementation Beginning 1 January 2025". Entities subject to the regime will be required to (among other things):
- Prepare and disclose, for each financial year, a "sustainability report", which will form part of the entity's annual financial report;
- Have the sustainability report audited by the auditor of the financial report, supported by technical climate and sustainability experts where appropriate (save that a transitional arrangement will be in place until 30 June 2030); and
- Keep, and make available to regulators or persons entitled to inspect when requested, sustainability records that correctly explain and record the preparation of the "substantive provisions" of the sustainability report.
Our August 2024 Commentary, "Coming Soon: Mandatory Climate Disclosure Laws in Australia", further explains the scenario analysis that must be undertaken by reporting entities to inform disclosures about the climate resilience of their strategy and business model.
All entities with operations in Australia should consider taking steps to assess whether they will be subject to the climate-related financial disclosures regime, as set out in the Act, and, if so, their ability and preparedness to comply with the regime's requirements.
The Australian Accounting Standards Board continues to finalise the Australian Sustainability Reporting Standards—the standards that sustainability reports will be required to adhere to. It is also expected that the Australian Securities and Investments Commission will release guidance on the regime in the near future.
