ASIC releases sustainability reporting guidance for public consultation

This article was co-authored with Joel Harriss.

• Introduction
• A recap on Australia's planned climate-related disclosure regime
• ASIC Draft Guidance
• Consultation on Draft Guidance
• Timing and next steps
• How we can assist you

Introduction

Earlier this month, ASIC released draft Regulatory Guide 000 Sustainability reporting (Draft Guidance) and Consultation Paper 380 Sustainability reporting (Consultation Paper) in relation to the recently introduced mandatory Climate-related financial disclosure (CRFD) regime.

The Draft Guidance includes information on which entities must prepare a sustainability report under the CRFD regime, how sustainability reporting requirements will interact with existing legal obligations, and how ASIC will administer the sustainability reporting requirements.

A recap on Australia's planned climate-related disclosure regime

The CRFD regime will require certain organisations to prepare a 'sustainability report' as part of their annual financial statements for financial years commencing on or from 1 January 2025. Sustainability reports will need to include statements required by Australian Sustainability Reporting Standard AASB S2 Climate-related disclosures, made by the Australian Accounting Standards Board, which are based on the international sustainability standards IFRS S1 General requirements for disclosure of sustainability-related financial information and IFRS S2 Climate-related disclosures, issued by the International Sustainability Standards Board. Those statements include matters relating to:

• The material climate-related risks and opportunities faced by the reporting entity.
• Metrics on its scope 1, 2 and 3 greenhouse gas (GHG) emissions (in addition to its governance, risk management, and other processes relating to these matters).
• Scenario analysis.

The CRFD regime will be phased in over several years, as organisations of different sizes are brought under its scope, based on revenue, asset value, and/or employee numbers. We have written extensively on the mandatory CRFD regime during its inception and passage through Parliament, most recently here.

ASIC Draft Guidance

ASIC as the regulator responsible for administering and enforcing the CRFD regime under the Corporations Act 2001 has a focus on ensuring "high-quality, consistent and comparable climate-related financial disclosures to enable users of that information to make informed decisions".¹ The Draft Guidance makes it clear that ASIC's role "does not generally extend to assessing the ambition or merit of an entity's climate-related strategy or targets."² ASIC importantly also notes in the Draft Guidance that it intends to take "a proportionate and pragmatic approach to supervision and enforcement" given there will be a period of transition during which reporting entities build capacity to report.³

ASIC's Draft Guidance covers the following matters:

• The preparation of an entity's sustainability report, when reporting entities are required to prepare a sustainability report and how to comply with related requirements.
• Specific issues about the contents of an entity's sustainability report, including forward-looking information, cross-referencing, and labelling.
• Sustainability-related financial disclosures outside an entity's sustainability report, including in Product Disclosure Statements and prospectuses.
• How the sustainability reporting requirements interact with existing legal and regulatory requirements.
• ASIC's administration of the sustainability reporting requirements, including the surveillance program, and granting relief from sustainability reporting requirements.

The Draft Guidance explains ASIC's interpretation of the CRFD regime, and how ASIC intends to administer and enforce these requirements. It does not, however, provide exhaustive guidance on the preparation of an entity's sustainability report, and the contents required in a sustainability report. It is up to each reporting entity to familiarise themselves with their sustainable reporting requirements under the Corporations Act.

Consultation on Draft Guidance

ASIC has invited comments and submissions on the Draft Guidance and Consultation Paper.

ASIC is inviting stakeholders to submit comments in relation to, among other things:

• The specific proposals and questions contained in the Consultation Paper.
• The impacts of the approaches proposed in the Draft Guidance, including:
  • Compliance costs
  • Effect on competition
  • Benefits
  • Non-financial impacts
• Any alternative approaches to those proposed in the Draft Guidance.

Timing and next steps

Submissions and comments on ASIC's Draft Guidance and Consultation Paper are due on 19 December 2024.

ASIC's final regulatory guide on the sustainability reporting regime is due to be released in Q1 of 2025.

The documents being consulted on are accessible from ASIC, here.

How we can assist you

If you would like more information on how the introduction of mandatory CRFD might affect your organisation or would like assistance with preparing a submission to ASIC in relation to the Draft Guidance and Consultation Paper, please contact a member of our ESG team.