Australia has taken a significant step toward enhancing corporate transparency and accountability in climate risk management with the recent passing of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024.
This landmark legislation mandates climate-related financial risk reporting for certain organisations, positioning Australia alongside global leaders in climate disclosure.
Starting 1 January 2025, Australia's largest emitters must disclose their climate-related risks and opportunities. The legislation, set to expand to other entities over the following years, represents a pivotal shift in how Australian businesses approach climate-related financial risks. Here's what your business needs to know about this new mandatory climate reporting framework.
The new climate reporting requirements are designed to align with the Australian Sustainability Reporting Standards, demanding detailed disclosures on how organisations are managing their climate risks and identifying opportunities.
Key elements include:
- Mandatory Disclosures: Companies must provide comprehensive information on their exposure to climate-related risks, including how these risks could impact their financial performance. Reporting must include detailed climate scenarios outlining how different climate outcomes could affect business operations.
- Scope and Timeline: Initially, the law applies to the most prominent companies, among the biggest emitters, beginning in 2025. The scope of the legislation will gradually expand, requiring more companies to comply by 2027. This phased approach gives businesses time to prepare but underscores the need for early action.
- Director Accountability and Compliance: Directors must ensure compliance with these reporting requirements. A three-year modified liability period limits enforcement actions to regulators, providing some initial leeway as businesses adapt to the new standards. However, directors are also directly responsible for ensuring accurate and thorough climate reporting.
- Alignment with Global Standards: The legislation is part of Australia's effort to align with international climate reporting standards, such as those outlined by the Task Force on Climate-related Financial Disclosures (TCFD). This alignment aims to provide investors and stakeholders with comparable, reliable data on how companies manage climate risks.
The introduction of mandatory climate risk reporting represents a significant shift for Australian businesses. This new level of scrutiny means that companies must develop robust climate strategies, enhance their data capabilities, and prepare for increased oversight from regulators and investors alike.
- Enhanced Transparency and Accountability: The legislation aims to drive greater transparency in how companies handle climate-related risks, pushing businesses to integrate climate considerations into their overall risk management frameworks. This enhances corporate accountability and strengthens investor confidence in companies that proactively manage climate risks.
- Preparing for Compliance: Organisations are advised to start preparing now, even if not among the first wave of companies required to report in 2025. Developing a clear understanding of the reporting standards, investing in the necessary data infrastructure, and training key personnel on compliance requirements will be crucial steps in ensuring readiness.
- Opportunities in Climate Adaptation: The legislation allows companies to showcase their climate resilience strategies beyond compliance. Those who effectively manage climate risks and seize opportunities, such as investing in green technologies or transitioning to low-carbon operations, can enhance their market positioning and appeal to sustainability-focused investors.
As businesses navigate this new regulatory landscape, having access to accurate, auditable, and actionable data will be essential. EP&T Global's EDGE platform is designed to provide the insights needed to meet these new reporting requirements, equipping organisations with detailed analytics on energy usage, carbon emissions, and climate risk scenarios.
Our platform delivers the data transparency regulators demand, helping businesses comply with the Australian Sustainability Reporting Standards and drive meaningful improvements in their environmental performance. With EDGE, companies can confidently manage their climate-related risks, enhance their sustainability credentials, and stay ahead of the curve in a rapidly evolving regulatory environment.
Australia's mandatory climate reporting legislation marks a transformative moment for corporate climate accountability. As the January 2025 start date approaches, businesses need to act early, invest in the right tools, and build robust climate risk management frameworks.
EP&T Global is here to support your journey toward compliance and sustainability. Our technology and expertise can help your organisation navigate these new requirements, ensuring that you meet regulatory expectations and leverage climate risk management as a strategic advantage.
