New Mandatory Climate Reporting and Regulatory Laws Pass the Senate
The Australian Senate has officially passed laws that will bring mandatory climate reporting requirements to relevant large businesses and bolster regulatory powers over financial market infrastructure
The Australian Senate has officially passed laws that will bring mandatory climate reporting requirements to relevant large businesses and bolster regulatory powers over financial market infrastructure. This legislation is seen as a critical move in modernising Australia’s financial system and driving the country’s transition to a net-zero economy.
The new laws introduce mandatory climate risk disclosure for relevant entities, making Australia one of the latest countries to enforce such measures. The Federal Government argues that these laws will not only provide investors with the necessary information to make informed decisions, but also incentivise investment in cleaner and more reliable energy sources.
“These reforms will give investors and companies the clarity and certainty they need to support the net-zero transformation and enhance Australia’s standing as an attractive destination for international capital,” said Treasurer Jim Chalmers in a media statement.
The climate reporting requirements, set to begin on January 1, 2025, will apply initially to Australia’s largest listed and unlisted companies, with additional businesses to be phased in over time. The Australian Accounting Standards Board will soon issue standards aligned with international guidelines, ensuring that businesses produce high-quality climate-related financial disclosures.
The legislation also strengthens the powers of financial regulators, giving the Reserve Bank of Australia (RBA) the authority to intervene in the event of a crisis at a domestic clearing and settlement facility. This move is intended to ensure the continuous operation of Australia’s critical financial market infrastructure, addressing a significant regulatory gap and implementing recommendations from the Council of Financial Regulators.
Reforms welcomed by industry
Mandatory climate risk disclosure reforms have been received positively from the industry. Rebecca Mikula Wright, CEO of the Investor Group on Climate Change (IGCC), highlighted the importance of these reforms for protecting investments and driving economic growth.
“Before you buy a house, you want to make sure it can weather the increasing storms to come,” she said. “Investors apply the same principle to climate investment in the economy because they want to invest in companies prepared for the transition to net-zero emissions and deliver stronger returns for millions of superannuation holders.”
Louise Davidson, CEO of the Australian Council of Superannuation Investors (ACSI), welcomed the passage of the climate reporting legislation, noting its importance for enhancing transparency and investor confidence.
“This very welcome development sees Australia follow other jurisdictions around the world,” Davidson said. “Climate change is a global issue and needs a global response. Mandatory reporting in Australia will help investors and others get a clearer picture of how climate risks are being managed domestically.”
Davidson also emphasised that the legislation would aid in making investment decisions by providing more comprehensive and comparable data on how companies are managing climate risks. ACSI’s research has shown that the majority of ASX200 companies already disclose their management of climate risks, but the new mandates are expected to further elevate standards and clarity across the market.