Australia’s House of Representatives passes climate-related disclosure bill
Australia’s House of Representatives has passed the Treasury Laws Amendment bill, which imposes mandatory climate-related disclosure obligations on large businesses.
The Bill empowers the Australian Accounting Standards Board to issue internationally aligned sustainability reporting standards that large Australian businesses and financial institutions must comply with.
Large businesses will need to prepare an annual sustainability report to disclose their climate risks and opportunities in accordance with the new reporting standards. The Australian Treasury said its policy intention is to improve the quality and comparability of climate-related financial disclosures across different companies and sectors, which, in turn, should help investors make more informed decisions.
The shift to mandatory climate financial disclosure has been described by government officials as ‘the biggest change to corporate reporting in a generation’.
The Bill intends to provide investors with greater transparency of a company or entity’s climate-related plans and strategies. “Specifically, the government believes that greater transparency can be achieved by improving the quality and comparability of disclosures of material climate-related financial risks and opportunities within the financial reporting framework. Improved climate-related financial disclosures will also support regulators to assess and manage systemic risks to the financial system,” said the government.
It noted that the proposed climate disclosure obligations are intended to apply to large businesses and financial institutions only, and will be phased in over time. Companies will need to make their climate financial disclosures in a sustainability report. Companies will be required to disclose their climate-related financial risks and opportunities in line with Australian Accounting Standards Board (AASB) standards. The AASB standards are expected to align as closely as possible with the relevant standards issued by the ISSB.
The Treasury estimates at least 1,800 Australian businesses and financial institutions will be mandated to disclose their climate-related risks and opportunities under the proposed climate disclosure regime. Affected businesses are categorised into three groups, each with different thresholds for reporting. The specific thresholds for these groups are based on criteria such as consolidated revenue, consolidated gross assets, and the number of employees.
Climate disclosure obligations for these three groups will be gradually phased in, starting with the largest entities and progressively moving on to smaller large businesses. The changes will begin on 1 January 2025.
