Climate reporting legislation finally passed by Parliament
Large companies are now legally required to disclose information about climate-related risks and opportunities following the passage of climate reporting legislation through Parliament.
The bill to implement Australia’s new mandatory climate-related reporting regime was passed by Parliament yesterday, after the lower house agreed to amendments made by the Senate.
Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 introduces new mandatory disclosures relating to climate in accordance with relevant sustainability standards made by the Australian Accounting Standards Board (AASB). The requirements will be phased in over a four-year period.
Climate-related financial disclosures will be subject to similar assurance requirements to those currently in the Corporations Act for financial reports, and will require entities to obtain assurance from an auditor. The extent and level of assurance required will be set out in Australian assurance standards for climate disclosures, developed by the Auditing and Assurance Standards Board (AUASB).
Relevant entities will need to disclose information about their exposure to material climate-related financial risks and opportunities, including their climate-related plans, greenhouse gas emissions and governance processes, in accordance with the relevant sustainability standards.
KPMG said the AASB is now expected to finalise the standards specifying what information companies must disclose in relation to climate change within the next few weeks. The associated auditing standards are expected to be released by Christmas.
KPMG Australia head of ESG advisory and assurance, Adrian King, said large companies are now legally obligated to report on climate, which means that the next two years will be critical in getting preparations underway, if businesses haven’t started already.
“Many companies are still getting their heads around what the requirements are and what their climate reporting look like. But legislation passing [through Parliament yesterday], it is now the time for company directors to ensure that they have a robust climate strategy, and importantly, making sure it’s one that they are going to be proud to communicate to investors,” said King.
“We now expect the AASB to unveil high-quality standards within the next few weeks.”
Speaking previously about the reporting regime, BDO national leader of sustainability Aletta Boshoff said the changes offer significant opportunities for companies that adopt them early.
“The introduction of mandatory climate reporting presents a significant opportunity for businesses to enhance their strategic planning and risk management,” said Boshoff.
“Companies that proactively adapt to these new requirements will not only ensure compliance but also build resilience and attract investors seeking sustainable practices.”
Under the new regulations, entities will be categorised into three groups, with Group One entities required to start reporting for the year ending 31 December 2025. Group Two and Group Three entities will follow in subsequent phases.
Boshoff said it’s crucial for businesses to understand their reporting timelines and prepare accordingly to avoid last-minute compliance issues.
“Now is the time for businesses to begin integrating these climate reporting requirements into their operations,” she said.
“Early preparation will provide a competitive edge and demonstrate commitment to responsible business practices.”
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