The Albanese government has passed the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 through the Senate to establish Australia’s climate risk disclosure framework.
The bill will see new mandatory climate reporting requirements apply to Australia’s biggest listed and unlisted companies and financial institutions from 1 January 2025, with other large businesses to be phased in over time.
In a statement, Treasurer Jim Chalmers said that after a decade of “delay and denial under the Coalition”, the government is taking action on climate reporting to support more investment in cheaper and cleaner energy and help companies and investors manage climate risks.
“These critical reforms provide investors and companies the clarity and certainty they need to support the net zero transformation and further strengthen Australia’s reputation as an attractive destination for international capital,” Chalmers said.
Sustainable investment bodies have celebrated the announcement, with Responsible Investment Association Australasia (RIAA) co-chief executive Estelle Parker deeming the move a “game-changer”.
“Internationally, company sustainability reporting is developing rapidly. This sends a strong signal that Australia is one of a growing number of countries acknowledging the significance of accurate and useable sustainability information in markets through the climate transition,” Parker said.
“These mandatory climate disclosures will play a key part in supporting Australian markets in the transition. It is a once-in-a-generation shift.”
Parker also emphasised the need for quality information when making climate-related financial disclosures.
“In this day and age, investors are crying out for high-quality, comprehensive and – importantly – comparable information about companies to make decisions about where to direct capital to align with both financial and sustainability objectives.”
However, she noted RIAA’s concerns on the inclusion of limited liability settings and called on the government to ensure that the temporary limited liability settings do not extend beyond the stipulated time frame.
“While RIAA has made it clear that any kind of safeguard or temporary limited liability is not in any way necessary, it is pleasing nonetheless to see the legislation pass. Future generations will thank us for getting this right.”
The Investor Group On Climate Change similarly welcomed the bill, stating that the new climate reporting rules will help Australian companies remain attractive in global capital markets.
“Before you buy a house, you want to make sure it can weather the increasing storms to come,” Rebecca Mikula Wright, IGCC chief executive, 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.”
Last week, the Treasurer also confirmed that the Australian Accounting Standards Board (AASB) will be tasked with issuing internationally aligned standards in the near future.
As the AASB implements the rules, IGCC noted that alignment with global standards, where possible, will streamline reporting processes for investors and companies who operate in multiple jurisdictions.
“Australia has the businesses and advantages that can drive the economy now and in a net zero world. These new rules will help businesses attract the capital they need to thrive and support jobs, pay bills and put food on the table for decades to come,” Wright said.
