The Albanese Government has passed the Treasury (Financial Market Infrastructure and Other Measures) Amendment Bill 2024 through the Senate to establish the climate risk disclosure framework in Australia.

The Bill sees the new mandatory climate reporting requirements apply to Australia’s largest listed and unlisted companies and financial institutions from 1 January 2025, with other large businesses phased in over time.

In a statement, Treasurer Jim Chalmers said that after a decade of “delay and denial within the Coalition”, the government was taking action on climate reporting to support more investment in cheaper and cleaner energy and help companies and investors to manage climate risks.

"These critical reforms provide investors and companies with 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 organizations have celebrated the announcement, with Responsible Investment Association of Australasia (RIAA) co-chief executive Estelle Parker believing the move will be a game-changer.

"Internationally, corporate sustainability reporting is developing rapidly. This sends a strong signal that Australia is one of a growing number of countries that recognize the importance of accurate and actionable information for the resilience of markets through the climate transition,” Parker said.

“These mandatory climate disclosures will play a key role in supporting Australian markets in the transition. This is a once-in-a-generation shift.”

Parker also emphasized the need for quality information when making climate-related financial disclosures.

“Investors today 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 goals. "

However, she noted the RIAA's concern about the inclusion of limited liability settings and urged the government to ensure that temporary limited liability settings do not exceed the specified time frame.
"While the RIAA has made it clear that any type of injunction or temporary limited liability is not necessary in any way, it's still nice to see the legislation pass." Future generations will thank us for getting it right.”

The Investor Group On Climate Change similarly welcomed the bill, saying the new climate reporting rules would help Australian companies remain attractive in global capital markets.

"Before you buy a house, you want to make sure it can withstand the growing storms that are coming," said Rebecca Mikula Wright, CEO of the IGCC.

"Investors are applying the same principle to climate investing in the economy because they want to invest in companies prepared to transition to net zero emissions and deliver greater returns for millions of superannuation holders."

Last week, the Treasurer also confirmed that the Australian Accounting Standards Board (AASB) would be tasked with issuing internationally agreed standards in the near future.

As the AASB implements the rules, the IGCC noted that alignment with global standards where possible will streamline reporting processes for investors and companies that operate in multiple jurisdictions.

“Australia has the business and the advantages to drive the economy now and in a net zero world. These new rules will help businesses raise the capital they need to thrive and keep jobs, bills and food on the table for decades to come,” Wright said.