The Government’s recent Consultation paper on Climate-related financial disclosure contains its proposals for the detailed implementation and sequencing of standardised, internationally‑aligned requirements for disclosing climate‑related financial risks by large Australian listed and unlisted companies, financial institutions and registrable superannuation entities. Background.
Corporations Act amendments will be made by 1 July 2024 to require climate‑related reporting obligations to be phased-in over three years based on company sizes.
Full application of the mandatory reporting for all groups of reporting entities will apply from the 2027-28 reporting year onwards.
While only large listed entities and financial institutions and registrable superannuation entities required to lodge financial reports under Chapter 2M of the Corporations Act would be subject to mandatory disclosure requirements in the transitional phase, other companies choosing to make climate-related financial disclosures (including to meet existing legal obligations to report material financial risks) would be encouraged to do so in line with the available Australian standards.
From commencement, companies would be required to disclose information about governance processes, controls and procedures used to monitor and manage climate-related financial risks and opportunities.
It is proposed that mandatory climate reporting will apply initially for 2024-25 for entities required to report under Chapter 2M of the Corporations Act and that fulfill two of the three thresholds:
– Has over 500 employees;
– The value of consolidated gross assets at the end of the financial year of the company and any entities it controls is $1 billion or more;
– The consolidated revenue for the financial year of the company and any entities it controls is $500 million or more.
From 2026-27 onwards mandatory climate reporting will be required for entities required to report under Chapter 2M of the Corporations Act and that fulfill two of the three thresholds:
– Has over 250 employees;
– The value of consolidated gross assets at the end of the financial year of the company and any entities it controls is $500 million or more;
– The consolidated revenue for the financial year of the company and any entities it controls is $200 million or more.
Entities lodging financial reports under Chapter 2M of the Corporations Act that meet two of the following criteria would be covered under climate-related risk disclosures legislation by 2027-28:
– the consolidated revenue for the financial year of the company and any entities it controls is $50 million or more;
– the value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $25 million or more; and
– the company has 100 or more employees at the end of the financial year.
Detailed disclosure standards will be formally established by the Australian Accounting Standards Board (AASB). The intention is that the Australian standards will be aligned as far as practicable with the final standards developed by the International Sustainability Standards Board (ISSB) and the AASB is expected to consult on these in the second half of 2023.
When legislation is required to give effect to the new requirements, exposure draft legislation will be released.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
