Australia's Parliament passed the Treasury Laws Amendment Bill on 9 September 2024, introducing mandatory climate-related financial disclosures for large entities and establishing a phased implementation schedule that will ultimately extend to the majority of significant businesses operating in the country. The legislation applies to Group 1 entities — the largest companies within scope — for financial years commencing on or after 1 January 2025, making Australia one of the first jurisdictions in the Asia Pacific region to enact binding climate disclosure requirements applicable from that date.
The disclosure framework is built around the Australian Accounting Standards Board's AASB S2 climate standard, which is aligned with the International Sustainability Standards Board's IFRS S1 and S2 frameworks. From the first reporting year, covered Group 1 entities will be required to disclose Scope 1 and Scope 2 greenhouse gas emissions along with information about climate-related financial risks, the governance arrangements through which those risks are overseen, and the strategies in place to manage climate-related opportunities and exposures over the short, medium, and long term.
THREE-TIER PHASE-IN COVERS ENTITIES OF VARYING SIZES
The legislation establishes a three-tiered rollout designed to give smaller and mid-sized entities additional time to build the reporting systems and verification capabilities needed for compliance. Group 2 entities will begin reporting for financial years starting on or after 1 July 2026, while Group 3 entities follow from 1 July 2027. The extended timelines acknowledge that climate-related data collection, internal governance processes, and external assurance infrastructure are more resource-intensive to establish for organisations that have not previously operated formal sustainability reporting frameworks.
The alignment with ISSB standards carries particular significance for Australia's financial sector. Institutional investors with global mandates increasingly require their portfolio companies to produce climate disclosures compatible with the ISSB framework, which is rapidly becoming the international baseline standard. Australian companies that have been producing voluntary disclosures under the Task Force on Climate-related Financial Disclosures will find the transition to AASB S2 structurally familiar, although the mandatory nature of the new obligations and the associated assurance requirements introduce a materially higher level of rigour.
Financial institutions in the Group 1 cohort are expected to face particular scrutiny from the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission, both of which have been developing supervisory expectations around climate risk management for several years. The standardised data set produced by the mandatory disclosure regime will support both regulators in their own analyses of climate-related exposures across the financial system and facilitate more consistent comparisons between institutions.
ASIC TO OVERSEE COMPLIANCE AND ADDRESS GREENWASHING
The Australian Securities and Investments Commission is the primary enforcement body responsible for monitoring compliance with the new disclosure obligations among listed entities and other large reporting entities within its jurisdiction. ASIC has been active in recent years in pursuing greenwashing cases — instances where entities misrepresent the environmental credentials of their products or activities — and the mandatory disclosure framework provides the regulator with a factual baseline against which such claims can be systematically assessed.
The passage of the legislation places Australia alongside the European Union and other jurisdictions that have moved from voluntary to mandatory climate disclosure regimes in recent years. For multinational financial institutions operating across several geographies simultaneously, the Australian mandate adds to the compliance workload but also creates an opportunity to standardise climate risk reporting practices across their global operations using frameworks built on common international foundations, reducing duplication and improving the coherence of the climate-related information they provide to capital markets.