Navigating Mandatory Climate Related Financial Disclosures in Australia

In September 2024, the climate-related financial disclosures regulation—Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (the Act) was passed, introducing mandatory climate-related reporting disclosure requirements. The Act integrates these disclosures into the existing financial reporting framework under Chapter 2M of the Corporations Act 2001.

As part of these new obligations, organisations must prepare a ‘sustainability report’ for each financial year, which will be included alongside their annual reporting suite. Climate-related disclosures must comply with the Australian Accounting Standards Board (AASB) S2 – Climate-related Disclosures.

What organisations are required to report?

The table below outlines the criteria that organisations must meet to report under the mandatory climate reporting requirements. Organisations that are required to lodge financial reports under Chapter 2M of the Corporations Act 2001 (Cth) must provide annual climate-related disclosures based on meeting one or more of the following three criteria: 

Small and medium entities that fall below the relevant size thresholds are exempt from making climate-related financial disclosures, unless they are National Greenhouse Energy Reporting (NGER) Scheme controlling corporations. These entities below the size thresholds are not required to lodge financial reports under Chapter 2M and therefore do not fall under the mandatory reporting framework. 

Charities registered with the Australian Charities and Not-for-Profits Commission (ACNC), as well as organisations registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 are not required to provided financial reports under Part 2M of the Corporations Act 2001 (Cth). As a result, they are also exempt from mandatory climate reporting requirements.  

However, not-for-profits that are not registered with the ACNC and are required to report under chapter 2M of the Corporations Act 2001 (Cth) are required to report under the mandatory climate reporting requirements if they meet the size thresholds. 

When are organisations required to report?  

Different transactional periods apply to entities with different year-ends. The below table outlines the reporting periods:

What organisations need to report?  

Annual disclosures on climate are required in line with Australian Accounting Standards Board (AASB) S2 – Climate related Disclosures. Organisations must disclose specifics on each of the following areas as outlined in AASB S2:

Directors are required to state whether, in their opinion, the disclosures are in accordance with the Corporations Act 2001 (Cth) including compliance with the AASB S2.

A transitional period applies, in which for the first three years, Directors are only required to make a ‘qualified directors declaration’ stating that they have taken reasonable steps to comply with the requirements of AASB S2 and the Corporations Act 2001 (Cth). After this transitional period, a full unqualified declaration is required.

When are these disclosures made?

Annual disclosures are made in a Sustainability Report which forms the ‘fourth’ report within the Annual Reporting suite:

Chapter 2M of the Corporations Act 2001 (Cth) outlines the basic contents of an annual sustainability report which includes:

• The climate statements for the year
• Any notes to the climate statements
• Any additional statements required by the minister
• Any notes to the additional statements (if required)
• The directors’ declaration confirming compliance
• Section 301A of the Corporations Act 2001 (Cth) requires the sustainability report to be audited in accordance with the auditing standards.
• Directors are required to state whether, in their opinion, the disclosures are in accordance with the Corporations Act 2001 (Cth) including compliance with the AASB S2. 

Section 301A of the Corporations Act 2001 (Cth) requires the sustainability report to be audited in accordance with the auditing standards.

What Assurance is required?

The Australian Standard on Sustainability Assurance AASA 5010 outlines the timeline for audits and reviews of information in Sustainability Reports under the Corporations Act 2001 (Cth).

The following is a diagrammatic representation of the assurance phasing as outlined in the standard:

What’s next?

Organisations need to:

• Understand their mandatory reporting requirements
• Conduct a gap assessment against these requirements with existing governance, internal processes and systems
• Develop a roadmap for implementation

Need Assistance?

For assistance navigating these requirements, contact our ESG expert Ann-Marie Ingeri.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.