Legislation on Australia’s climate-related disclosure regime tabled in Parliament

A recap on Australia’s planned climate-related disclosure regime

Under the government’s proposed climate-related disclosure regime, companies which prepare annual financial reports under Chapter 2M of the Corporations Act 2001 (Cth) (Corporations Act) and meet certain thresholds will be required to submit a ‘sustainability report’ as part of their annual financial reports. This will need to include:

1. a climate statement for the year;
2. any statement prescribed by the regulations for the year;
3. notes on either (i) or (ii); and
4. the directors’ declaration as to the compliance of the statements with the relevant sustainability standards.

The climate statements will initially only need to be audited to the extent required by the Australian Accounting Standards Board (AASB) with a transition to full auditing for all reporting entities from 1 July 2030. The Auditing and Assurance Standards Board (AUASB) recently released a Consultation Paper for public comment to assist it in developing auditing standards that will apply to the CRFD regime. Comment on the AUASB Consultation Paper is open until 3 May 2024.

The regime will be phased in over several years across three groups of entities, which will fall under the regime’s remit on different deadlines. As one of the reporting deadlines has now changed, please see the following section for a table showing all the latest group thresholds and deadlines.

We outlined the CRFD regime in detail when the Treasury’s exposure draft was released in January 2024. That article can be found here (noting that some parts of the regime have since been updated, as set out below).

Delayed commencement of reporting

The main change to the CRFD regime introduced in the Bill is that the proposed start date of the regime has been shifted back by at least six months and up to 12 months, depending on when the act to introduce the CRFD regime commences. This means that the reporting obligation for Group 1 entities will arise on 1 January 2025, where the act commences on or before 2 December 2024, or 1 July 2025 if the act commences between 3 December 2024 and 1 June 2025.¹ No additional relief is provided to Group 2 and 3 entities, with their respective obligations arising on 1 July 2026 and 1 July 2027, respectively.²

As before, asset owners whose value of assets is equal to or greater than $5 billion at the end of the financial year will fall under Group 2.

Finally, it remains the intention of the CRFD regime to allow the smallest in-scope entities to avoid having to complete a full standardised disclosure where they do not have material climate-related risks or opportunities (but they will still need to include a statement to this effect).³

Modified liability regime

The modified liability regime will provide limited immunity in relation to the making of “protected statements”, which will include statements in a sustainability report (or statements in an auditor’s review of a sustainability report) which are made for the purpose of complying with a sustainability standard or assurance standard about:

• scope 3 GHG emissions;
• scenario analysis (within the meaning of the sustainability standards); and
• transition plans (within the meaning of the sustainability standards).⁴

The immunity will apply for a period of three years after the commencement of the act. During the immunity period, reporting entities will be immune from civil suits in relation to protected statements, but can still be subject to action from ASIC and criminal proceedings.

Additionally, a limited immunity period of 12 months will apply for statements made in a sustainability report (or an auditor’s review of a sustainability report) that relate to climate and are forward looking.⁵

Timing and next steps

The Bill has now been referred to the Senate Economics Committee, which must report on the Bill by 30 April 2024.

Interested persons will be able to make submissions during this period, however the deadline for doing so is yet to be confirmed.

How we can assist you

If you would like more information on how the introduction of mandatory climate-related financial disclosures might affect your existing operations or future projects, or would like assistance with preparing a submission to the Senate Economics Committee, please contact a member of our ESG team.

For further ESG-related insights, please visit our ESG homepage linked here.