Key points
- ASIC is working hard to help entities comply with the new mandatory climate-related reporting framework, so that they are on a course to succeed.
- In March, ASIC released a new regulatory guide, which includes direction on the content required in the sustainability report and we are currently reviewing applications for relief.
- We are also putting resources into capacity building – and intend to develop a set of educational materials to help report preparers understand the concepts underlying the reporting obligations.
Check against delivery
Good morning, everyone.
I would like to begin by acknowledging that I am on ᾱ CdzܲԳٰ. I pay my respects to Elders past and present – and I extend that respect to Aboriginal and Torres Strait Islander people here today.
Thank you for inviting me to speak at the RIAA Conference. I wish I could be there in person with you today but I’m thankful to RIAA that I can participate virtually.
Before I begin, I would like to congratulate RIAA on its 25th anniversary and acknowledge the important and enduring contributions you have made to progress responsible investment and sustainable finance in Australia and New Zealand.
Not only has RIAA driven positive change in that time, it has successfully navigated enormous policy, legislative and regulatory change, and of course this is ongoing.
Last year, the law mandating climate-related financial disclosures was passed. At RIAA 2024, ASIC’s Chair Joe Longo described this as the “biggest changes to financial reporting and disclosure standards in a generation”.
Fast forward 12 months to RIAA 2025 – and I think that ‘once-in-a-generation’ descriptor still stands. Not just in terms of the significance of these changes, in their own right. But, also in what they mean for reporting entities.
It’s that last point that I want to focus on today.
This new framework is important. It will have a big part to play in addressing financial system climate risk. And ASIC is working hard to help entities comply.
I’m going to spend most of my time with you today focusing on what we are doing, practically, to support reporting entities. I will focus on three things in particular:
- Regulatory guidance;
- Regulatory relief; and
- Capacity building.
I’ll also talk about our enforcement approach. Because this is something we are asked about a lot. And we know it’s something many directors and entities are thinking about – as are investors and others.
About the new reporting framework
I will come to that detail in a moment. But, before I do, I’d like to provide a quick refresher on the whens and whats of the framework.
So, first question: when do entities need to start reporting?
As you probably know, the mandatory climate reporting requirements are being phased in over three cohorts – based on entity size. For the largest of these, they are already in effect.
Their reporting period began on the 1st of January 2025. So, we can expect to see the first reports from these ‘Group 1’ entities in March 2026.
The reporting periods for Groups 2 and 3 will commence on the 1st of July 2026 and 2027, respectively.
Over time, many small to medium sized companies – outside of these groups – may be asked to provide emissions-related information to these larger entities, where they are part of their supply chains. I’ll talk about what we’re doing to help these companies shortly – in relation to ‘capacity building’.
Next question: what needs to be included in these sustainability reports?
The sustainability report is the fourth report required as part of a reporting entity’s annual report – alongside the annual financial report, directors’ report and auditor's report.
In practice, the sustainability report contains two key elements: an entity’s climate statements for the year and the directors’ declaration on the statements.
In those climate statements, for example, entities must disclose material information about climate-related risks or opportunities that could reasonably be expected to affect the entity’s prospects.
They also need to include relevant metrics and targets. As well as any information about their related governance, strategy or risk management.
They must also use climate-related scenario analysis to assess their climate resilience and material financial risks and opportunities relating to climate.
For Group 3 entities who determine that there are no material climate-related financial risks or opportunities for a financial year, the climate statements should include an explanation of how the entity has made this determination.
Helping entities comply
So, the logical follow-on question then is: what’s ASIC’s role in all of this?
In short, we are responsible for administering these requirements. That necessarily includes supervising and enforcing compliance. But we also have an important function in assisting with compliance.
Our focus is on ensuring that entities’ mandatory climate-related financial disclosures are high quality, consistent, comparable – and that they comply with the Corporations Act and AASB S2. That is, the Australian Accounting Standards Board’s climate standard.
Why? So that investors and consumers can make confident and informed decisions – and because accurate and transparent information is essential to market integrity.
The three areas of work that I mentioned earlier – regulatory guidance, regulatory relief and capacity building – are designed to support that.
Regulatory guidance
In March, we published our new regulatory guide on sustainability reporting (RG 280).
We know this is something reporting entities and report preparers have been eagerly anticipating. That’s why we made – and met – a public commitment to release it within the first quarter of 2025.
When we create or update regulatory guidance, there’s a process that comes before it. This includes public consultation – and one thing this does is allow us to stress-test the content with future users and make changes to the guidance based on their feedback.
In the case of RG 280, we received 60 submissions from key stakeholders. Including entities, industry associations, law firms, advisory and audit service providers, academics and consultants. In response to their feedback, we made a number of changes.
For example, we added sections on climate-related scenario analysis and disclosing scope 3 greenhouse gas emissions. Scope 3, of course, being value chain emissions – an area we understand some SMEs may be concerned about.
We also included more specific guidance for directors of reporting entities – and updated our guidance on disclosing sustainability-related financial information outside the sustainability report.
We have also revised our position on the ‘labelling’ of sustainability-related information in sustainability reports.
Initially we proposed that a ‘sustainability report’ should refer exclusively to that prepared under section 292A of the Corporations Act. In other words, it should be limited to the climate statements and directors’ declaration on the climate statements.
However, we heard through the consultation process that entities wanted the flexibility to include other sustainability-related information – in addition to the mandatory climate-related financial disclosures – to avoid producing multiple reports and to make it easier for investors.
So, our position in our guidance is that we will administer these laws on the basis that reporting entities may include additional sustainability-related information in the sustainability report. Provided that the mandatory climate-related financial information is clearly identified and not obscured.
We are open to considering whether any further guidance may be required in future, after we have observed how sustainability reporting and other sustainability-related disclosure practices develop in Australia and international markets.
To help inform our understanding of these developments, we are reviewing a selection of voluntary climate-related disclosures by Group 1 entities. This will help us understand the approach entities are currently taking.
We also intend to review sustainability reports once they are lodged with us, from March next year – and share our findings with the market.
Regulatory relief
We have started to receive applications from entities for relief from their sustainability reporting and audit obligations. This is something ASIC has the power to grant – under certain circumstances.
What we’re seeing in these applications is a combination of novel issues that are highly specific to a particular entity – along with some common themes that may have broader relevance.
We have provided guidance on our approach to relief in RG 280. But we also intend to publicise the approach we are taking to these novel applications. While all applications need to be considered on their facts, this will help the market understand how we are exercising our discretion.
In these early stages, many of the issues being raised will take time to consider – because, by definition, they are new. So, we are encouraging entities considering relief to apply as early as possible.
Capacity building
We understand that many smaller companies may be concerned about what the new framework will mean for them.
As such, we are putting a lot of resources into capacity building – and intend to develop and deliver a set of educational materials, which will help report preparers understand the concepts underlying the reporting obligations.
Topics covered include understanding the basics of climate change, the key concepts of emissions accounting, and explaining the key steps a hypothetical entity could undertake to perform a scenario analysis.
These materials are aimed at Group 3 companies and SMEs who are suppliers to reporting entities. But should be useful to any reporters who are new to these obligations.
ASIC’s approach to enforcement
Now, a few words on enforcement.
ASIC will be pragmatic and proportionate in our approach as the reporting requirements are being phased in.
These obligations are new – and we understand it will take time for entities to build the capabilities needed to meet them. This is a period of transition for all involved – and our focus, at this point, is on helping entities through it.
If we take enforcement action in the early stages, it will likely be where we see misconduct of a serious or reckless nature – or where a reporting entity fails to prepare a sustainability report for a financial year.
It’s important to point out, though, that regulatory action isn’t all high-profile court proceedings. There are a range of interventions open to us.
For example, we will engage directly with reporting entities to understand the basis for the relevant disclosures, and we may also provide them with an opportunity to make changes.
We also have new directions power available to us. This will allow us to direct an entity to correct any statement in a sustainability report which we consider to be incorrect, incomplete or misleading.
In contrast, our enforcement posture on greenwashing is different. Our work here is founded on enforcing legal obligations that are long-standing and well-established – and which prohibit misleading and deceptive conduct.
Conclusion
To conclude, high quality, consistent, comparable – and compliant – climate-related disclosures matter. They are critical to the confident and informed participation of investors and consumers – and, in turn, to market integrity.
These are the outcomes we all want to uphold. And ASIC is doing what we can to put reporting entities on a course to succeed.
Thank you.