Introduction

The Australian climate reporting mandates, introduced through the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (“Act”), were passed by Parliament on September 9, 2024, and received Royal Assent on September 17, 2024.  This legislation requires climate-related financial disclosures in accordance with the Australian Sustainability Reporting Standards (“ASRS”) promulgated by the Australian Accounting Standards Board (“AASB”) on September 20, 2025. The first two AFRS are AASB S1 and AASB S2 (“Reporting Standards”), which prescribe reporting under the Act.

Our objective here is to provide both an introduction to the Act and the Reporting Standards, and enough detail about key aspects to enable effected organizations to understand their obligations and begin to develop a plan to meet them.

Scope and Timing

Reporting is mandated for companies that are required to file financial reports under Chapter 2M of the Corporations Act 2001 (“Corporations Act”), and which fall within the following categories:

Courtesy E&Y 2025               

While the first reporting period begins for Group 1 companies in 2025, accounting and reporting under the Act and the Reporting Standards follows the same year convention and filing period (calendar or otherwise) as the entity’s other financial reports.  Further, if the filer is required to prepare financial statements on a consolidated basis, individual entities within the consolidated group do not need to file a separate report so long as the parent company report includes them.

Report and Contents

Under this framework, reporting entities are required to prepare a sustainability report (“Sustainability Report”), which contains a Climate Statement (as defined and described in the Act) for the fiscal year, notes thereto and a directors’ declaration about the statements and notes.  The Sustainability Report is subject to the same materiality standard as other AASB reporting.  It is filed at least annually, on the same schedule as the entity’s other financial reports, and within three (3) months after the end of the applicable time period.  The Reporting Standards closely follow the well-known ISSB / IFRS S1 and S2 requirements.

The key components of the Climate Statement are as follows:

Governance

Information about the governance processes, controls and procedures that a reporting entity uses to monitor and manage climate related risks and opportunities.  This section should include information about Board of Directors’ oversight of targets, management’s role in governance and whether or how climate related performance metrics are included in remuneration policies.

Strategy

Information about an entity’s strategy for managing climate related risks and opportunities.  This sections should begin by identifying the entity’s climate related risks and opportunities, and describing the current and anticipated effects thereof on the entity’s business model and value chain. This section should include a description of the entity’s strategy and decision making processes, its transition plan with key assumptions (if any), and how climate related targets will be resourced and achieved including adaptation, mitigation or adoption of new technologies. Scanario analysis is also required including two scenarios:  1 consistent with 1.5 degrees of warming, and the other assuming a warming scenario in excess of 2.5 degrees.

Risk management

Information about how climate related risks and opportunities are identified, assessed, prioritized and monitored, and whether and how these processes are integrated into its overall risk management framework.  This section should include the processes and policies used to identify, assess, prioritize and monitor climate risks and an assessment of the entity’s overall risk profile and risk management practices.

Metrics and Targets

Information about how the entity measures, monitors and manages climate related risks and opportunities, and how it assesses its own performance including progress towards meeting any targets it has set or may be required by law.  This section should include information on climate related metrics including an estimate of the portion of assets or business activities vulnerable to climate related risks and opportunities, amount of capital deployed toward climate related risks and opportunities, internal carbon prices (where applicable) and portion of executive compensation linked to climate related considerations.  This section should also include any climate related targets set, with supporting information on the approach and scope thereof, plus a description of progress toward meeting those targets.

Financial effects

Information about the impact of climate related risks and opportunities on the entity’s financial operations.  This section should describe the current and anticipated effect of climate related risks and opportunities on the entity’s financial position, financial performance and cash flows.

Emissions

The Climate Statement must include a presentation of Scope 1 and 2 emissions; and Scope 3 from the second reporting year, all calculated and presented pursuant to GHG Protocol standards

Liability Framework and Director’s Declaration

Reports under the Act and Reporting Standards are subject to the current Australian legal framework in various areas, including directors’ duties, misleading representations and reporting compliance, as set forth in the Corporations Act, the Australian Securities and Investment Commission Act 2001 and the Competition and Consumer Act 2010. 

Directors must declare that the Sustainability Report complies with the Corporation Act and ASRS standards.  For the first three reporting years, this only requires a statement that the entity has taken reasonable steps to ensure the Sustainability Report complies with the Corporation Act and ASRS standards.  Further, modified liability has been adopted in a few areas, namely: (1) Liability for transition plans, scenario analysis and Scope 3 emissions is suspended for Sustainability Reports for periods between January 1, 2025 and December 31, 2027 and (2) Liability for forward looking statements is suspended for the first reporting year for Group 1 entities.

Assurance

A company’s Sustainability Report will be subject to assurance requirements similar to those in the Corporations Act for financial reports, for both the company and its auditor.  To set applicable parameters for assurance, on January 28, 2025 the Australian Auditing and Assurance Standards Board approved the Australian Standard on Sustainability Assurance (“ASSA”) 5000 General Requirements (consistent with the international standard ISSA 50000) and ASSA 5010 the timeline and phasing model. 

Summarized in the chart below, the assurance requirements are phased in with the goal of reaching a “reasonable assurance” end state by 2030:

The Road to Compliance

If you are uncertain about applicability of the Act and the Reporting Standards, engaging professionals (climate consultants, auditors) or starting an internal working group within your company is a great first step toward compliance.  Once you ascertain that these new requirements apply to your company, existing internal procedures for financial reporting should be modified and expanded, pursuant to your company’s existing change management processes, to enable the production of reports that comply with the requirements of the Act and Reporting Standards.

--Chip Horton, Tellus Markets Corp.

Need help planning your approach to ASRS compliance? Book a free consultation with our team here → Free consultation.  It’s never too early to understand your company’s regulatory posture and design a program that ensures compliance!

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