Australian Treasury has unveiled draft legislation which is designed to implement a standardised mandatory disclosure of climate-related information by companies.

This is the result of merging various voluntary ESG frameworks into a single set of global disclosure standards. The bar for alignment to these proposed standards is high. Under existing drafts, companies must quantify and disclose the anticipated effects of ‘significant’ sustainability and climate-related risks and opportunities on their business model and value chain over the short, medium and long term. With further disclosures required, and with stakeholders placing increasing value on ESG metrics, companies will likely need to revisit approaches to confidently report this data.

Who will be affected?

Entities of substantial size, encompassing both listed and unlisted companies, will need to divulge details concerning climate-related risks and opportunities.  The legislation references the existing financial reporting framework thresholds such that entities satisfying a minimum of two out of the three following criteria will be required to comply:

1. the consolidated revenue of the entity (and the entities it controls) is equal to or greater than $50 million.
2. the value of the consolidated gross assets at the end of the financial year of the entity (and the entities it controls) is equal to or greater than $25 million.
3. the entity (and the entities it controls) have at the end of the financial year, 100 or more employees.

Small and medium businesses are initially exempt; however, the reporting framework allows for expansion in the future.

What will be required in a Sustainability Report?

Entities will need to provide:

• a climate statement (prepared in line with the relevant sustainability standards issued by the AASB).
• notes to the climate statement.
• any prescribed statements by regulations; and
• a director’s declaration regarding compliance with relevant sustainability standards.

The proposed disclosure requirements would be phased in over a four-year period, organised into three groups based on entity size (meeting 2 out of 3 criteria) as follows:

Should you have any questions about how these changes will impact you, please reach out to your Engagement Partner. We will continue to keep you updated when Treasury releases confirmed changes.