On 27 March 2024, the Treasurer introduced and read the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Bill) to the House of Representatives. The fourth schedule of the Bill sets out a new mandatory sustainability reporting regime. It follows an exposure draft (Exposure Draft) and consultation that took place earlier this year. We have previously provided an overview of the Bill: see Climate-related financial disclosure - KWM
Since our last update, there have been several developments on mandatory sustainability reporting in Australia which we summarise in this article.
Status of Bill in Australia
On 3 May 2024, the Senate Economics Legislation Committee noted broad support for a mandatory climate reporting regime and ultimately recommended that the Bill be passed in its current form. This was despite mixed opinions being raised in submissions to the committee relating to the commencement date of the reforms, three-year modified liability period, auditing requirements, application to local subsidiaries of global companies, workforce impact, the Minister’s discretionary powers and scope 3 emissions disclosures.
However, non-government Committee members did recommend some amendments.
In a dissenting report on behalf of the Coalition, Liberal Party senators Andrew Bragg and Dean Smith expressed concerns, amongst other things, about the tight timeframes for the inquiry, the potential for a ‘disproportionate compliance burden’ on smaller reporting entities, Ministerial discretion and the need to expand modified liability protections to cover climate-related statements made in investor briefings, website materials and public statements.
Separately, the Greens recommended the inclusion of more specific obligations around the undertaking of climate scenario analysis and that the timing of the modified liability protections be adjusted to apply during the first one or two years of reporting obligations for each reporting group. As currently drafted, modified liability protections would run for up to three years from the first reporting period for the first group of reporters, with the Greens raising concerns that this would ‘disproportionately benefit’ the earliest reporting groups.
The Greens also recommended that the scope of the modified liability protections be reduced, to only provide protections against claims of misleading and deceptive conduct that seek loss or damage.
Additional comments were also provided by independent senator David Pocock, who, while supporting the Bill overall, recommended the removal of the modified liability protections altogether, and likewise recommended that a “Current Policies” scenario analysis (reflecting 3 degrees of global warming) be included as a mandatory requirement.
On 6 June 2024, the Bill passed the House of Representatives without any amendments.
It will now move to the Senate where it will be considered.
At the time of writing this update, this has yet to happen; the next block of Senate parliamentary sitting dates are 24 June 2024 to 4 July 2024.
If the Bill is passed in its current form, mandatory reporting will commence for the first group of reporters for financial years beginning on or after 1 January 2025.
ASIC statement to start preparing now
The Australian Securities and Investments Commission (ASIC) will be responsible for administering this regime once passed.
On 22 April 2024, ASIC Chair Joe Longo spoke at the Deakin Law School International Sustainability Reporting Forum. In his keynote speech, he delivered a clear mandate for all organisations to start preparing for mandatory reporting now to figure out how to “marshal data, support capabilities and start keeping the necessary records now – today.”[1]
In his speech, Joe Longo also signalled that ASIC would:
- develop and issue a new regulatory guide which will outline ASIC’s approach to climate reporting, seeking relief from obligations under this regime and its interactions with existing law;
- publish resources for those who prepare and use sustainability reports, including information on the new sustainability reporting obligations, ASIC’s regulatory functions in relation to the regime and the types of information found in sustainability reports; and
- conduct proactive surveillance of climate and sustainability disclosures made by entities in financial reports.
KWM Report: ASX50 Sustainability Reporting and Governance in 2023
King & Wood Mallesons has been supporting and monitoring the ASX50’s approach to climate reporting and governance from the early stages of target-setting to the increasingly sophisticated governance required to meet emissions objectives, mitigate greenwashing risk and maintain transparency.
We have recently released the latest edition of this report which builds on our cumulative knowledge to arm you with the information that you need to best prepare yourself for what’s coming.
You can read more about this here: Breaking new ground: ASX50 sustainability reporting and governance in 2023 - KWM
For further information and assistance with the transition to mandatory sustainability reporting, please contact the authors.
