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Sustainability Reporting Update: Proposed Adoption of Climate-Related Disclosure Standards in Australia 

15/05/2024by admin0Read: 2 minutes

In a landmark move towards global sustainability reporting, the International Sustainability Standards Board (ISSB) unveiled its inaugural sustainability disclosure standards, IFRS S1 and S2, on June 26, 2023. These standards aim to establish a comprehensive global framework for sustainability disclosures, catering to the information needs of capital market stakeholders.

IFRS S1, titled “General Requirements for Disclosure of Sustainability-related Financial Information,” provides guidance on identifying sustainability-related risks and opportunities, along with the relevant disclosures pertaining to these aspects. On the other hand, IFRS S2, “Climate-related Disclosures,” focuses specifically on identifying, measuring, and disclosing climate-related risks and opportunities.

In Australia, the Australian Accounting Standards Board (AASB) introduced ED SR1 during a consultation period from October 23, 2023, to March 1, 2024. This exposure draft proposed Australian Sustainability Reporting Standards that align with a “climate first” approach to adopting IFRS S1 and S2 within the country.

Additionally, the Treasury presented the Treasury Laws Amendment (Financial Markets Infrastructure and Other Measures) Bill 2024 on March 27, 2024, following prior consultations. This bill outlines headline proposals concerning climate-related financial disclosure requirements for various entities under Chapter 2M of the Corporations Act.

The proposed legislation mandates reporting by entities meeting specific size criteria or having a significant presence in sectors relevant to climate change. However, exemptions are available for small and medium-sized enterprises below relevant thresholds and entities exempted from lodging financial reports.

Organisations required to report must adhere to relevant sustainability standards issued by the AASB, with proposed amendments empowering the AASB to create such standards. These standards would cover aspects like governance, strategy, risk management, and metrics and targets related to climate change.

The proposed climate statement would encompass disclosures on material climate-related financial risks and opportunities, governance and risk management processes, and climate-related metrics and targets. Reporting timelines vary for different entity groups, with Group 1 entities required to report from January 1, 2025.

Moreover, the proposed legislation introduces modifications to liabilities and offences applicable to corporate reporting, particularly concerning climate-related disclosures. It also outlines obligations for directors and proposes a framework for assurance over sustainability information.

Moving forward, the Australian Auditing and Assurance Standards Board (AUASB) released a Consultation Paper on March 20, 2024, seeking input on assurance requirements for climate and other sustainability information. The paper outlines a phased approach to assurance, commencing with limited assurance of certain disclosures and progressing towards reasonable assurance.

To conclude, the proposed implementation of climate-related disclosure standards in Australia marks a significant step towards enhancing transparency and accountability in corporate reporting. By aligning with global sustainability standards, Australia aims to strengthen its commitment to combatting climate change and promoting sustainable practices across industries.

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