ASIC urges businesses to prepare for mandatory climate reporting

This week ASIC, the Australian financial regulator, published (click here) a reminder imploring in-scope businesses to prepare for the go-live of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 that passed Parliament on 9 September 2024 and into law on 17 September 2024. This Bill sets the requirements for Australia’s sustainability reporting, the first batch falling due on 1 January 2025. An ASIC Commissioner commented:

"Large businesses and financial institutions should ensure that they implement appropriate governance arrangements and sustainability record-keeping processes ahead of the mandatory climate reporting requirements taking effect from 1 January 2025."

Pertinent points from the publication are briefly summarised as follows:

• This is a significant reform that will have far-reaching implications for many stakeholders;
• ASIC recognises that there will be a period of transition as organisations develop the capabilities required to comply;
• ASIC will take a proportional and pragmatic approach to supervision and enforcement as industry adjusts to these new requirements;
• Through the transition, ASIC will ensure current disclosure and governance standards in relation to voluntary sustainability disclosures are maintained and that entities comply with their existing legal obligations;
• They specifically mention the longstanding prohibition against misleading and deceptive conduct i.e. greenwashing;
• ASIC notes that they have created a website to support reporting entities (click here) – this resource will be constantly updated, firms are recommended to regularly consult it;
• ASIC expect further consultations prior to issuing new guidance including their approach to relief from such reporting and how the regime will interact with existing regulatory requirements;
• ASIC reminds firms that the rules will be phased in over the next three years across three groups of reporting entities - the first firms with a financial year commencing on or after 1 January 2025;
• The second and third reporting groups will comprise of firms with financial years starting on or after 1 July 2026 and 1 July 2027 respectively;
• ASIC urges all reporting entities, including those in the second and third reporting groups, to start preparing now for the new climate disclosure regime.
• The announcement contains a table summarising the entities in scope of the new disclosure rules as well as their respective go-live dates.

 RegTrail Insights

Unlike the US SEC’s sustainability disclosure rules, Australia’s climate disclosure regime has passed into law and is on track for implementation with relatively little resistance. Firms falling into scope should ensure that their preparations are underway, regardless of which reporting group the group entity falls into. 

Proactive monitoring for further guidance is also advised to ensure unnecessary development spend is avoided. ASIC, through various communication forums including this recent speech covered in this newsletter, have made it clear that while some transition leeway will be afforded as firms adjust to the new rules, they will nonetheless be monitoring compliance with the new regime as a priority.