The Albanese government has opened consultation on the final policy design of corporate climate-related financial disclosure requirements.
The draft legislation, released on Friday, seeks to make amendments to the Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001 to introduce “standardised, internationally-aligned reporting requirements for businesses”, to ensure they are making high-quality, climate-related financial disclosures.
Among these amendments, as detailed in the exposure draft’s explanatory materials, is a new “sustainability report” that entities will need to prepare in addition to their financial statements.
The report will consist of the climate statement for the year, notes to the climate statement, any statements prescribed by the regulations for the year, and the directors’ declaration about the compliance of the statements with the relevant sustainability standards.
The government has suggested that a “phased-in approach” should be used for the obligation to prepare a sustainability report, starting with a relatively limited group of very large entities.
Namely, according to the explanatory materials, entities required to prepare sustainability reports will be separated into three groups, with Group 1 entities – companies with a consolidated revenue equal to or greater than $500 million, gross assets of $1 billion or 500 or more employees – obligated to prepare the reports for FY2023–24 and FY25–26.
Group 2 – entities with consolidated revenue of $200 million, gross assets of $500 million and 250 employees – will be expected to prepare a sustainability report for FY26–27, while all other relevant entities won’t assume the responsibility until after financial year 2027.
“The draft legislation gives companies the opportunity to build capacity to make high-quality climate risk disclosures by providing early visibility of the proposed reporting requirements and expand the breadth of entities required to report over time,” Treasurer Jim Chalmers said on Friday.
These changes, the Treasurer asserted, will give investors and companies ample clarity to invest in new opportunities as part of the net zero transformation.
“This is an important step for improving transparency and will help investors and companies make more informed investment decisions and lay the foundation for a stronger, more robust financial system.”
According to Mr Chalmers, the government is taking a “balanced” approach with these changes.
The final policy design follows the government’s first consultation paper on the development of a new Australian climate risk disclosure framework released in December 2022.
A second round of consultation was then held in June 2023, in particular to seek out views on whether “the proposed positions relating to coverage, content, framework, and liability are workable”.
Treasury has invited interested parties to comment on the exposure draft and policy statement, with consultation to close 9 February 2024.