Australia Passes Law to Introduce Mandatory Climate Reporting from 2025

Australia

The long-awaited Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (the Bill), which establishes the framework for Australia’s first climate-related financial disclosure regime, was passed by Parliament on 9 September 2024.

Group 1 entities will be required to start reporting for financial years beginning on or after 1 January 2025, meaning preparations for those subject to the regime are already well underway.

This landmark legislation represents a major shift in how businesses prepare their annual reports and positions Australia as a global leader in mandatory climate reporting aligned with the ISSB standards.

The new climate disclosure legislation, introduced by Australian Treasurer Jim Chalmers, establishes climate-related reporting requirements largely in line with the recently released standards by the IFRS Foundation’s International Sustainability Standards Board (ISSB). On 20 September, the Australian Accounting Standards Board (AASB) held its 209th meeting, where the board voted on the pronouncement of AASB S1 and AASB S2.

This meeting, which drew over 150 registered observers, was the largest public gallery for an AASB Board deliberation. The board formally voted to adopt AASB S1 as a Voluntary Standard and AASB S2 as a Mandatory Standard. This marked the culmination of significant work, with the board recognising the efforts of staff in completing this phase and setting the stage for future initiatives.

The initial reporting requirements will commence in January 2025, delayed slightly from the initial draft legislation’s proposed start date of July 2024. These requirements will apply to all public companies and large proprietary companies obliged to provide audited annual financial reports to the Australian Securities and Investments Commission (ASIC) and meet specific size thresholds.

This includes companies with over 500 employees, revenues exceeding $500 million, or assets over $1 billion, as well as asset owners with more than $5 billion in assets. For medium-sized companies (250+ employees, $200 million+ revenue, $500 million+ assets), reporting will begin in July 2026, and for smaller companies (100+ employees, $50 million+ revenue, $25 million+ assets), it will commence one year later.

The legislation also introduces a phased approach to Scope 3 emissions reporting, giving companies an additional year from the start of their disclosure obligations to report on their indirect value chain emissions. Moreover, companies will benefit from three years of protection from litigation related to Scope 3 disclosures.

Investor groups have welcomed the passage of this climate reporting legislation. In a media release on 22 August, Louise Davidson, CEO of the Australian Council of Superannuation Investors (ACSI), said:

“This very welcome development sees Australia follow other jurisdictions around the world. Climate change is a global issue and needs a global response. Mandatory reporting in Australia will help investors and others to get a clearer picture of how climate risks are being managed domestically.”