Legal development

'Climate first, but not only…': Mandatory Climate Reporting Bill introduced into Parliament

meeting at big table

    On 27 March 2024, the Treasurer introduced the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Bill) to the House of Representatives. The fourth schedule of the Bill sets out the proposed mandatory sustainability reporting regime (Regime). It is clear from the explanatory memorandum for the Bill that these reforms are merely the first step on a long road to broader sustainability reporting – that is, "climate first, but not only".

    Given the timing of the last consultation and the number of submissions made, we are disappointed that a further consultation was not conducted. However, we are pleased that a small number of submissions made were clearly accepted:

    • The Bill's commencement date has been extended to 1 January 2025;
    •  The directors' declaration has been amended so that for the first 3 years of the regime, the directors are only required to declare that the entity has taken reasonable steps to ensure the substantive provisions of the sustainability report have complied with the Corporations Act; and
    • The proposed relief from liability regime has been slightly extended.

    Current state of play


    The proposal is that an entity who is subject to the Regime will be required to comply with the obligations set out in the fourth schedule of the Bill for the first financial year following the commencement date – currently scheduled to be 1 January 2025. This is a significant improvement on the proposed 1 July 2024 commencement date but, in our view, still requires entities to take immediate steps to commence preparing for this Regime.

    Who has to report



    Report from first financial year commencing on or after

    Group 1

    Largest entities

    An entity (and the entities it controls) which meets at least two of the following criteria:

    1. consolidated revenue equal to or greater than $500 million;
    2. consolidated gross assets equal to or greater than $1 billion; or
    3. at least 500 FTE employees at the end of the financial year.

    1 January 2025

    Group 1

    NGER reporters (above the publication threshold)

    The main publication thresholds are:

    1. 50kt of emissions; or
    2. 200TJ of energy produced; or
    3. 200TJ of energy consumed.

     1 January 2025

    Group 2

    Second largest entities

    An entity (and the entities it controls) which meets at least two of the following criteria:

    1. consolidated revenue equal to or greater than $200 million;
    2. consolidated gross assets equal to or greater than $500 million; or
    3. at least 250 FTE employees at the end of the financial year.

    1 July 2026

    Group 2

    All other NGER reporters

    NGER reporters that do not meet the above main publication thresholds.

     1 July 2026

    Group 2

    Asset owners: registered scheme, registrable superannuation entity or retail CCIV

    Value of assets at the end of the financial year (including the entities it controls) equal to or greater than $5 billion.

     1 July 2026

    Group 3

    All other in-scope entities

    An entity (and the entities it controls) which meets at least two of the following criteria:

    1. consolidated revenue equal to or greater than $50 million;
    2. consolidated gross assets equal to or greater than $25 million; or
    3. at least 100 FTE employees at the end of the financial year.

     1 July 2027

    Group 3 entities would only be required to comply with reporting requirements if they are impacted by material climate-related financial risks or opportunities for the financial reporting period. If this is not the case, the entity can make a statement saying it does not consider that it is materially exposed to such risks or opportunities. Strangely, directors’ declarations would still be required and audit requirements would still apply in these circumstances.

    It is now clear that even if it meets the criteria, an entity which is a registered scheme, registrable superannuation entity, or retail CCIV cannot be a Group 1 entity.

    Foreign controlled groups

    Unfortunately, Treasury did not accept the various submissions made which suggested that an Australian subsidiary in a foreign controlled group which otherwise reported in accordance with ISSB standards in an equivalent jurisdiction should not have to prepare and lodge a separate sustainability report in Australia.

    The impact of this is that entities will not be able to rely on ISSB-compliant reports of foreign parent companies to satisfy the Australian Regime. Unfortunately, this means that reporting under the Corporations Act 2001 (Cth) (Corporations Act) would need to occur at the Australian level, regardless of the reporting which happens at a foreign parent company level. The Bill does contemplate providing ASIC with the power to provide relief to entities if it considers that there are "appropriate grounds to prepare a consolidated sustainability report on behalf of related entities". As with all ASIC powers, it remains to be seen how this will be exercised.

    Location and name of the climate disclosure

    The Bill states that climate-related financial disclosures will be incorporated in "a new annual sustainability report". However, it remains unclear whether cross-referencing will be allowed and we encourage ASIC to update the ASIC relief currently available which enables cross-referencing in the annual report to include the sustainability report. Unfortunately, the report does need to be entitled "Sustainability Report" which means that entities already publishing such a report will need to rename that other document.

    Entities can voluntarily disclose information in the sustainability report that is not legally required that the entity nonetheless considers relevant to sustainability (for example, information about an entity’s nature, biodiversity, first nations or diversity strategy and performance).

    However, the Bill provides that this information must be clearly distinguished as a ‘separate voluntary statement’ and state that it is not included in the statements or notes because of a requirement of the legislation. We encourage entities to consider carefully whether or not to include such additional information given the considerable complexity this may cause. If this type of information is included, aligning with an internationally recognised and accepted voluntary standard, such as the Taskforce for Nature Related Disclosures will be important.

    The directors' declaration

    Thankfully, Treasury has amended the wording of the required declaration. For the first 3 years from the commencement date (expected to be 1 January 2025), the directors are only required to declare that the entity has taken reasonable steps to ensure the substantive provisions of the sustainability report have complied with the Corporations Act. Following that time period, directors will need to declare that the substantive provisions of the sustainability report are in accordance with the Corporations Act including that the report complies with sustainability standards and discloses any material financial risks or opportunities relating to an entity as required under the sustainability standard.

    What about auditing?

    The Bill provides that the audit and assurance requirements will be phased in, in accordance with standards to be developed by the Auditing and Assurance Standards Board (AUASB). From 1 July 2030, the permanent audit requirements in the Bill will commence. The current AUASB proposal is that auditors would provide only 'limited assurance' on Scope 1 and 2 emissions required for sustainability reports prepared for the first year – which is a lower standard then that required by the directors' declaration and may result in directors querying how they can become comfortable with the declaration without an expert's assurance.

    Last but certainly not least – liability

    There have been some changes made to the proposed liability regime in the Bill. The Bill now provides that the following disclosures will be protected for financial years commencing during the three years from the start date (i.e. the day after the Bill receives Royal Assent) if they are made in the sustainability report or auditor's report:

    • Scope 3 greenhouse gas emissions (including financed emissions);
    • scenario analysis in the sustainability report; and
    • a "transition plan" within the meaning of the sustainability standards.

    Further, all forward-looking statements related to climate and made for the purpose of complying with sustainability standards, if they are made in sustainability reports for financial years commencing within the first 12 months of the start date will be protected.

    However, this protection only applies to a such a statement made within the sustainability report or statements required under a Commonwealth law that are “substantively protected statements” (for example, a reproduction of a protected statement in a Product Disclosure Statement). Unhelpfully it does not appear to extend to other voluntary disclosures – although we are hopeful that this will be extended to continuous disclosure announcements.

    During this time, only ASIC will be able to take action for misleading and deceptive conduct.

    What do you need to do?

    To prepare for the Regime, you should:

    • determine whether you are required to prepare a sustainability report;
    • determine when you are required to prepare a sustainability report and stay informed on the detail of the proposed Australian Sustainability Reporting Standards (ASRS Standards);
    • use the opportunity to mature your approach to managing climate change risk through your governance, risk and compliance systems. An integrated approach to risk management, reporting and disclosures will ensure the information disclosure process is fit-for-purpose, robust and defensible; and
    • consider the benefits of developing a credible "transition plan" as a key tool to address the evolving sustainability reporting landscape and documenting your approach to implementing and reflecting your climate/net zero commitments.

    Authors: Miriam Kleiner, Partner and Elena Lambros, Partner, Risk Advisory.

    This publication is a joint publication from Ashurst Australia and Ashurst Risk Advisory Pty Ltd, which are part of the Ashurst Group.

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    This material is current as at 9 April 2024 but does not take into account any developments after that date. It is not intended to be a comprehensive review of all developments in the law or in practice, or to cover all aspects of those referred to, and does not constitute professional advice. The information provided is general in nature, and does not take into account and is not intended to apply to any specific issues or circumstances. Readers should take independent advice. No part of this publication may be reproduced by any process without prior written permission from Ashurst. While we use reasonable skill and care in the preparation of this material, we accept no liability for use of and reliance upon it by any person.

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