• Certain Aussie companies must report climate risks from 2025
  • This new law will boost transparency for climate investors
  • Here’s a quick look at what these reports will include

 

In September last year, Australia introduced new legislation requiring large and medium-sized companies to report their climate risks and greenhouse gas emissions starting on January 1, 2025.

The aim is to increase transparency around how companies are managing climate challenges and their potential impact on operations.

This move is part of a broader effort by the government to steer the country towards net-zero emissions by 2050.

The key points of the new climate reporting requirements are…

Large companies first:
Starting on January 1, 2025, companies with over 500 employees, annual revenues of over $500 million, or assets over $1 billion will need to disclose climate-related risks and emissions across their entire value chain. The reports are to be released at the end of each financial year.

Medium-sized companies later:
From 2026, medium-sized companies with 250+ employees and $200 million+ revenue will also need to comply, with smaller firms (100+ employees) expected to follow in 2027.

Scope 3 reporting:
A phased approach will be taken for reporting Scope 3 emissions (those generated from a company’s supply chain). Companies will get an extra year before they need to disclose this information, and they’ll have some legal protection for three years against litigation linked to these emissions.

Net Zero Economy Authority:
The legislation also sets up the Net Zero Economy Authority to help Australia transition to a low-emission economy. It will support workers in high-emission industries, help communities attract clean energy businesses and guide companies and investors through the shift to net zero.

 

Why does all this matter for ESG investors?

Well, it’s big win for transparency.

Investors will now have clearer, more consistent data on how companies are managing the financial risks associated with climate change, both from physical impacts (like extreme weather) and transitional risks.

This helps investors make better-informed, long-term decisions and more effectively engage with companies on their climate strategies.

“We welcome the new standards, which will ultimately help improve transparency,” said Adrian King at KPMG.

“With the new legislation in place, investors, as well as the Australian public, will soon be able to easily understand an entity’s climate strategy and associated financial risks.

 

What will be included in the sustainability report?

Here’s what the contents of the new sustainability report will look like, as laid out in section 296A of the law.

Climate statements:
This is the big one. It’s basically a snapshot of the company’s climate performance for the year, in line with the sustainability standards set by the Australian Accounting Standards Board (AASB). If you’re thinking “carbon emissions and climate-related risks”, this is where it goes.

Notes to the climate statements:
Think of this as the fine print. It’s any extra info that explains the climate statements, including what the government says is important for environmental sustainability (though this bit isn’t relevant just yet).

Directors’ declaration:
This is the company’s top brass, giving the official nod that everything in the report is true, correct, and up to scratch.

Now, it’s not just a fluffy summary. The law wants specifics:

  • Financial risks & opportunities: Companies have to highlight any major financial risks or opportunities tied to climate change. This means investors will get the lowdown on how a company’s climate strategy could impact their bottom line.
  • Climate metrics & targets: This includes emissions from Scope 1 (direct emissions), Scope 2 (indirect emissions from power use), and Scope 3 (everything else, like supply chain emissions). There’s also a mention of “financed emissions” under Scope 3.
  • Governance & risk management: How is the company managing climate risks and opportunities? Is it taking this seriously at board level?

 

Scenario analysis

And here’s the really interesting bit of the new report: Scenario analysis.

Companies are now required to look at the impact of climate change under two global temperature scenarios:

2°C scenario: This is the “bad” scenario, where global temps rise by more than 2°C. Expect extreme weather, big disruptions and serious risks.

1.5°C scenario: This is the “better” scenario, where global warming is limited to 1.5°C. The idea is that it’ll help companies plan for a low-carbon future, avoiding the worst of the physical risks and sticking to climate goals.

So… for ESG investors, all this is massive.

If you’re looking for investments that are strongly aligned with climate, these reports are a gold mine for your research.

You’ll be able to see:

  • What risks companies are exposed to (e.g., are they ready for the physical impacts of climate change?)
  • What their strategy is for achieving net-zero emissions.
  • How well their leadership is engaging with these issues. (If the board’s not thinking about this, you should be worried.)

In short, this new legislation will give investors the tools to evaluate how well companies are preparing for the climate transition, which is exactly what ESG investing is all about.

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