Australia mandates companies to report on climate change from 2024

The government of Australia is planning to implement mandatory climate-related financial disclosure requirements for companies and financial institutions, according to a new consultation paper launched by the Treasury.

The reporting requirements would apply as soon as 2024 for large businesses, with smaller entities phased in over the following three years.

The consultation paper stated:

“The Government has committed to ensuring large businesses and financial institutions provide Australians and investors with greater transparency and accountability when it comes to their climate-related plans, financial risks, and opportunities. As part of this commitment, the Government will introduce standardized, internationally-aligned reporting requirements for businesses to make disclosures regarding governance, strategy, risk management, targets and metrics – including greenhouse gasses.”

The announcement follows the release of a ‘discovery consultation’ launched by the Treasury in December 2022 on the development of a climate risk disclosure framework and plans for mandatory reporting.

The new consultation follows up on the feedback from the initial paper, with detailed disclosure proposals, and seeks input on the workability of the proposed coverage, content, framework and enforcement rules.

The paper notes that stakeholders responding to the initial consultation “were almost universally supportive of the Government mandating climate-related risk disclosures.” The paper also notes the importance of aligning reporting requirements with international frameworks, highlighting in particular the new standards being developed by the IFRS Foundation’s International Sustainability Standards Board (ISSB). The ISSB released the finalized versions of its new sustainability and climate-related reporting standards earlier this week.

Following a similar track as the ISSB, Australia’s proposed climate-related disclosure requirements focus on governance, strategy, detailed risks, opportunities, metrics & targets. Some specific proposals include a requirement for companies to disclose transition plans, including information on offsets, target-setting and mitigation strategies, the processes used to monitor and manage climate-related risks and opportunities, and the use of scenario analysis. The rules would also require companies to report Scope 1 and 2 and material Scope 3 emissions, in addition to industry-specific metrics.

The paper also proposes a phased-in approach to the new climate-related reporting requirements, both by company size, as well as some disclosure requirements that require time to build capabilities and expertise. Larger entities, such as those with over 500 employees and revenues over $500 million and assets over $1 billion would be covered by the new rules beginning 2024-2025, with medium-sized companies (250+ employees, $200 million+ revenue, $500 million assets) the following year, and smaller entities (100+ employees, $50 million+ revenue, $25 million+ assets) in 2027-2028.

The proposal also gives entities an extra year to implement Scope 3 reporting, allows time for scenario analysis to transition from qualitative to quantitative, and introduces a 3-year transitional period for enforcement in areas including scenario analysis, transition planning and Scope 3 emissions.


About the Authors

Associate Director, Investment Banking

Prachurjya has over 16 years of experience in investment banking with Acuity Knowledge Partners. At Acuity, he has led sector and product-specialist pilot teams across Capital Markets, ESG, Debt Advisory, Loan Syndications, Metals & Mining and Real Estate. He has been actively involved in setting up and on-boarding new ESG Advisory, ESG DCM and Sustainable Finance teams for various bulge bracket investment banks. Within DCM and Rating Advisory, he has been instrumental in helping the clients achieve over 30% in annual savings on both regular and adhoc tasks through standardization of the outputs and deployment of our proprietary BEAT tools.

Delivery Manager, Investment Banking

Puja has 6 years of extensive experience in ESG, Climate Change & Sustainability and she is supervising the ESG team at Acuity. She also has diverse experience in conducting ESIA, EHS compliance audits, ESG Risks and Controls, EHS & ESG Due Diligence assessments. Prior to joining Acuity, she was working with companies like KPMG Global Services, EY India and ERM India. She has expertise in provisioning extensive research requirements for clients through preparation of Peer Benchmarking, Target Compilation, Sustainability report, Sustainable Finance Updates and Sectoral ESG Thematic Detailing Engagement.

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