The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (the Bill) this week passed Parliament, making mandatory climate-related reporting law in Australia from January 1, 2025.
Whilst this captures only large entities initially, it will roll out to other businesses reporting under Chapter 2M of the Corporations Act 2001 over time.
Importantly, businesses that are part of the supply chain for larger reporting entities may be asked questions about their own climate-related financial disclosures.
Implications
The Corporations Act now includes climate-related financial disclosure as part of a new annual sustainability report, sitting alongside annual financial reports. This will include a climate statement containing the following:
- Any material climate-related financial risks or opportunities;
- Any metrics and targets relating to climate, including Scope 1, 2 and 3 greenhouse gas emissions; and
- Any information about the governance, strategy or risk management by the entity in relation to climate risks, opportunities, metrics and targets.
Entities will only be required to disclose Scope 3 emissions from their second reporting year onwards.
Amendments To Original Bill
Both Houses of Parliament passed the Bill, though with some amendments, and now it only awaits Royal Assent to become law.
The amendments include that at least the following two scenario analysis must be included in the sustainability report: high (2.5°C or higher) and low (1.5°C).
This was a result of a Government deal with the Greens, and the introduction of the “high” scenario analysis is a more stringent disclosure requirement than was consulted on by the Australian Accounting Standard Board’s Australian Sustainability Reporting Standards.
Requirements
Entities that prepare financial reports under Chapter 2M of the Corporations Act that meet certain thresholds will be required to prepare sustainability reports.
Group 1, the largest entities, will be required to submit these reports commencing January 1, 2025. This includes companies with at least two of the three thresholds: $500 million+ consolidated revenue for the financial year; $1billion+ consolidated gross assets at EOFY; and 500+ full-time equivalent employees at EOFY.
Group 2 will be required to report from July 1, 2026. This includes companies with at least two of the three thresholds: $200 million+ consolidated revenue for the financial year; $500million+ consolidated gross assets at EOFY; and 250+ full-time equivalent employees at EOFY.
Group 3 will be required to report from July 1, 2027. This includes companies with at least two of the three thresholds: $50 million+ consolidated revenue for the financial year; $250million+ consolidated gross assets at EOFY; and 100+ full-time equivalent employees at EOFY.
You can read all the details on the Bill here.
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