Australian Government Introduces Mandatory Climate Reporting

Solar panels on a roof in Albany, Western Australia, on Jan. 22, 2024. (Susan Mortimer/The Epoch Times)

The Albanese government has introduced laws to mandate climate reporting for large companies from early 2025, intending to spur greater investment in clean energy and assist investors and companies to “manage climate risks.”

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill (pdf) was introduced into the Australian House of Representatives on March 27.

The bill includes new compulsory climate reporting requirements for major companies. Additionally, it establishes a framework to protect our financial market infrastructure during crises.

The law starts with Australia’s largest companies but then extends to encompass medium and smaller companies over time.

“The legislation will introduce standardised, internationally-aligned reporting requirements for businesses, to ensure they are making high-quality climate-related financial disclosures,” Treasurer Jim Chalmers said.

“Our changes will establish Australia’s climate risk disclosure framework, giving investors and companies the transparency, clarity, and certainty they need to invest in new opportunities as part of the net zero transformation.”

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The reporting requirements will apply from Jan 1. 2025 for Australia’s large listed and unlisted companies.

Over time, the government will also require other large businesses to be phased in over time.

Debate on the legislation was adjourned in the House of Representatives on March 27 and will resume in the next sitting of the house.

How Will it Work?

Following two rounds of government consultation, the Bill’s introduction signifies a milestone in climate reporting regulation.

An explanatory memorandum (pdf) accompanying the bill highlights that entities surpassing certain thresholds will be mandated to disclose climate-related information.

Major entities would need to complete a new “sustainability report” for the financial year, including a climate statement along with their financial statements.

To start with, it will apply to companies that meet two out of three criteria: revenue exceeding $500 million (US$326 million), gross assets surpassing $1 billion, and a workforce of 500 employees or more.

The second group includes companies with two out of three of the following: revenue of more than $200 million, assets of $500 million, and 250 employees or more.

Finally, the third group will apply to companies that satisfy two out of each of these criteria: revenue exceeding $50 million, gross assets exceeding $25 million, and 100 or more employees.

What Will Need to Be Disclosed?

The climate statements will need to disclose all material financial “risks and opportunities” relating to the climate.

In addition, they will have to include metrics and targets that relate to the climate including greenhouse gas emissions, according to the government’s memorandum explaining the legislation.

Further, these statements will be required to include information on governance and risk management related to these targets.

The government has outlined provisions for exemptions for small entities that do not possess material climate-related risks or opportunities.

“It is intended that complete standardised climate disclosures would not be required for smaller in-scope entities that do not have material climate-related financial risks or opportunities,” the government clarified.

“In these instances, the entity’s climate statement will only include a statement to that effect, as well as an explanation of how it reached this conclusion.”

Financial Market Infrastructure Changes Included in Law

In addition, Treasurer Jim Chalmers said that the new legislation will also include reforms to empower the Reserve Bank of Australia (RBA) to swiftly intervene and resolve issues affecting financial markets.

“The legislation will allow the RBA to step in and quickly resolve crises impacting critical financial market infrastructure and strengthens the RBA and Australian Security and Investments Commission (ASIC)’s regulatory powers,” Mr. Chalmers said.

“It will also ensure continuity of clearing and settlement services in the face of a crisis.

“Whether it’s climate disclosures, financial markets, or many of our other important changes, the Albanese Government has a broad and ambitious economic reform agenda.

“Our economic reform agenda is all about modernising our economy and providing more certainty for more investment in Australia, and that’s what this legislation will deliver.”

Dutton Concerned About ‘Renewables Only Obsession’

Meanwhile, Opposition leader Peter Dutton has raised concerns that the Labor government’s renewables-only approach has potential impacts on the cost of living.

In Parliament, Mr. Dutton said, “Labor’s renewables-only obsession is causing Australians’ energy bills to skyrocket, pushing 500 families a week into energy poverty,” he said (pdf).

The national energy regulator is now warning that 90 percent of Australia’s existing baseload energy, which is used to firm up renewables, will leave the grid by 2034.

“Why is the Albanese government making life harder for Australian families who are already struggling to cope with Labor’s cost-of-living crisis?” Mr. Dutton queried.

In response, Prime Minister Anthony Albanese said renewables are the cheapest form of new energy.

“The Leader of the Opposition asked me about, as he characterises it, a renewables-only approach. I say it is the market-led approach that leads you to the cheapest form of new energy, which is renewables,” Mr. Albanese said.

Shadow Minister for Energy Affordability and Western Sydney Melissa McIntosh also raised similar concerns about the “renewable only” strategy increasing electricity prices on March 20.

“Western Sydney food charity Mama Lana’s may close down due to their energy bills increasing by $900,” she said (pdf).

“When will the minister admit that the Albanese government’s disastrous renewables-only energy policy is leading Australia in the wrong direction?”