On August 22, 2024, the Australian Senate approved the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, which includes new climate-related financial reporting requirements for large entities.
The Bill, which has been the subject of extensive consultations and amendments, will now return to the House of Representatives for a final vote before becoming law.
The Senate-approved Bill largely aligns with the version introduced to Parliament in March 2024, with one significant addition.
Entities will now be required to disclose information derived from scenario analysis using at least two global warming scenarios: a 1.5 degrees Celsius scenario, as mentioned in the Climate Change Act 2022, and a 2.5 degrees Celsius or higher scenario.
Key aspects of the legislation include:
- Reporting will commence for financial years beginning on or after January 1, 2025.
- Entities with December 31 year-ends will report first, followed by those with June 30 year-ends in 2026.
- Entities subject to Corporations Act Chapter 2M reporting obligations meeting prescribed thresholds will be required to report.
- Reporting will be phased in based on entity size or emission levels.
- Content will be dictated by Australian Sustainability Reporting Standards (ASRS), including Scope 3 emissions disclosure.
Climate-related disclosures will be included in a sustainability report within the annual report.
A phased approach to assurance will be implemented, culminating in reasonable assurance of all climate-related financial disclosures from years beginning July 1, 2030.
Adrian King, Head of ESG Advisory & Assurance for KPMG Australia, said: “Better climate-related financial disclosures are desperately needed here in Australia, and today’s welcome news brings us a step closer to mandatory reporting on climate change. Importantly, the changes will help Australia keep up with similar developments in key economies across the world.”
The Australian Accounting Standards Board is expected to finalise the sustainability standards in the coming weeks.
The House of Representatives is scheduled to sit in the week beginning September 9, 2024, which would be the earliest the Bill could be finalised.
This legislation marks a significant step in Australia’s efforts to address climate change and align with global reporting standards, providing investors and stakeholders with crucial information about climate-related risks and opportunities in the corporate sector.
