Key Impact Points:
- Mandatory Climate Reporting: Australia introduces mandatory climate risk disclosures for large and medium-sized companies starting in 2025.
- Net Zero Finance Strategy: The legislation is part of the Albanese government’s sustainable finance roadmap to support the transition to a net zero economy.
- Regulator Powers Boosted: New laws also grant regulators increased powers to manage financial market infrastructure risks.
The News
Australia’s Senate has passed a bill mandating climate reporting for large and medium-sized companies, marking a significant milestone in the country’s move towards establishing a comprehensive climate risk disclosure framework.
What It Means
Starting in 2025, large public and proprietary companies that meet size thresholds—those with over 500 employees, revenues exceeding $500 million, or assets of more than $1 billion—will be required to provide detailed climate-related financial disclosures. Medium-sized companies will follow two years later, with smaller businesses coming on board the year after that.
The legislation aligns Australia’s reporting standards with global guidelines issued by the International Sustainability Standards Board (ISSB). Reporting will cover climate-related risks, opportunities, and greenhouse gas emissions across the entire value chain. The aim is to offer transparency and consistency for investors, ensuring that companies are accountable for their climate impacts.
Government’s Vision
Australia’s Treasurer, Jim Chalmers, highlighted the importance of these reforms in a statement after the Senate vote:
“These critical reforms provide investors and companies the clarity and certainty they need to support the net zero transformation and further strengthen Australia’s reputation as an attractive destination for international capital.”
The climate disclosure framework is a central pillar of the Albanese government’s Sustainable Finance Roadmap, which seeks to mobilize private capital for the transition to a net zero economy. Other key components of the Roadmap include developing a sustainable finance taxonomy and creating a labeling system for sustainable investments.
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Financial Market Infrastructure Protection
The newly passed laws also tackle risks to Australia’s financial market infrastructure. New powers are being granted to regulators such as the Reserve Bank of Australia (RBA) and the Australian Securities and Investments Commission (ASIC) to address crises at clearing and settlement facilities swiftly. These reforms are in response to recommendations from the Council of Financial Regulators, aimed at safeguarding the stability and resilience of Australia’s financial system.
Looking Ahead
The Australian Accounting Standards Board (AASB) and the Australian Auditing and Assurance Board (AUASB) are working on developing the aligned climate disclosure and assurance standards, which are expected to be released by the end of 2024. The phased rollout of the reporting requirements ensures that companies have time to adapt to the new standards and provides a pathway for Australia to lead in sustainable finance.
The broader economic reform agenda led by the Albanese government focuses on maximizing the benefits of cleaner energy and modernizing financial systems to ensure a more prosperous and resilient economy.
Australia is positioning itself as a global leader in climate transparency and sustainable finance, with the mandatory climate reporting laws offering long-term benefits for both the economy and the environment.
