The Australian Government has released Treasury Laws Amendment Bill 2024: Climate-related financial disclosure, which is draft legislation confirming mandatory reporting of climate-related financial disclosure requirements.

The legislation introduces new requirements, which will build on the existing financial reporting framework for entities that lodge financial reports under Chapter 2M of the Corporations Act 2001 (Cth) (Corporations Act).

This will impact Australian companies, disclosing entities, registered schemes and registrable superannuation entity (RSE) licensees.

New Sustainability Report

If passed the new requirements will require the inclusion of a new ‘sustainability report’ to be lodged with the Australian Securities and Investments Commission (ASIC), in addition to annual financial statements.

The sustainability report is to consist of the climate statement, notes to the climate statement (if any), a directors’ declaration about the statements and any additional statements relating to matters concerning environmental sustainability required by a legislative instrument.

Climate statements will be those statements required by the sustainability reporting standards issued by the Australian Accounting Standards Board (AASB). As noted in our article here, the sustainability reporting standards have been released in draft and are open for comment until 1 March 2024.

Commencement

The requirement to prepare a sustainability report will be progressively phased in, generally based on the size of the entity.

Audit

Climate disclosures will be subject to similar assurance requirements to those currently in the Corporations Act. The legislation requires the sustainability report to be audited by the auditor of the financial report supported by technical climate and sustainability experts where appropriate. Whilst the Auditing and Assurance Standards Board will set out a pathway for phasing in these requirements over time, assurance of Scope 1 and Scope 2 emissions disclosures will commence from 1 July 2024.

Disclosure

Investors will be notified of their right to obtain a copy of the most recently lodged sustainability report through disclosures set out in the Product Disclosure Statement or Prospectus (as applicable).

The Australian Government is seeking feedback on the exposure draft legislation up until 9 February 2024.