Australia’s climate reporting has arrived: Learnings from Group 1 reporters

3 days ago
4 min read

Australia's mandatory climate reporting regime is now in force. Under AASB S2 (Climate-related Disclosures), large entities must produce auditable climate statements as part of their general purpose financial reports under Chapter 2M of the Corporations Act 2001, helping investors and lenders understand how climate-related risks and opportunities affect cash flows, access to finance, and cost of capital.

The regime commenced in 2025 with "Group 1" entities, Australia's largest reporters. In the first wave of mandatory reports, 259 large entities with 31 December 2025 financial year ends (34 listed entities and 225 unlisted entities) lodged sustainability reports with ASIC across mining, construction, financial services, oil and gas, and energy distribution. The remaining Group 1 entities with financial years ending before 31 December 2026 are reporting throughout 2026. Group 2 entities will commence reporting for financial years ending on or after 30 June 2027, and smaller Group 3 entities will commence reporting for financial years ending on or after 30 June 2028. If the uplift in the reporting threshold included in the May Budget is passed, Treasury estimates that the regime will ultimately capture about 4,500 entities by FY28/29.

AASB S2 is the Australian adaptation of IFRS S2, positioning Australia among the first jurisdictions globally to mandate climate disclosures aligned with the ISSB framework. This global alignment is significant, particularly as other major economies show signs of shifting away from similar regulation. In the United States, the SEC has proposed to rescind its 2024 climate-related disclosure rules entirely, citing concerns about regulatory overreach. Australia’s commitment to mandatory, internationally aligned reporting stands as a clear signal to global investors of transparency and comparability in climate reporting, although the Australian regime captures smaller entities than those captured in other jurisdictions.

New assurance requirements add further rigour, with governance, strategy, and Scope 1 and 2 emissions within minimum limited assurance scope from FY25/26, progressively expanding toward reasonable assurance over all disclosures by FY29.

Early Report Observations

With the first cohort of reports now lodged, ASIC has published its early observations, offering a valuable guidance for entities preparing their 30 June 2026 reports. The regulator's review delivered encouraging early findings: the quality and quantity of climate-related information has increased materially compared with prior voluntary disclosures, with standardised requirements driving greater consistency. ASIC also commended the use of tables, diagrams, and visual aids as examples of emerging better practice. There were however specific areas identified for improvement including:

Avoid conflicting disclaimers: Don’t use disclaimers that conflict with Chapter 2M, e.g. telling users not to rely on the report or disclaiming accuracy.
Use reasonable, supportable information: Reflect past events, current conditions and forecasts — including prior extreme weather — in short, medium and long-term risks and mitigants.
Disclose judgements and uncertainty clearly: Make judgements, assumptions and measurement uncertainty clear, effective and proximate — including how AASB S2 proportionality has been applied.
Don’t obscure material information: Voluntary content must not obscure material information required by AASB S2. Index tables can help users locate required disclosures.
Tighten cross-references: Cross-references must meet AASB S2 and RG 280 — precise, on the same terms and timing, and ideally lodged with the sustainability report.
Reassess climate-related targets: Cover both quantitative and qualitative targets — entity-set and those required by law (e.g. Safeguard Mechanism GHG targets).

Beyond the regulatory lens, our own analysis has revealed areas of divergence particularly where companies have needed to exercise judgment as they interpret the standards for the first time.

For instance, approximately 50% of reporters did not disclose whether their risk identification was conducted on an inherent or residual basis, a distinction with significant implications for how risks are understood and compared. Where quantitative disclosure was not provided, 61% cited measurement uncertainty, suggesting still significant challenges exist as organisations attempt to mature accounting of climate related financial impacts in their business. Assurance maturity also remains at an early stage, with only a small number of companies from our review obtaining reasonable assurance over part of their report and only 30% exceeding the minimum assurance scope voluntarily. Detailed analysis can be found in Emma Newnham’s April 2026 Mandatory Sustainability Reporting in Practice.

Our Work Supporting Clients

Over the past twelve months, the Owl Advisory team have worked with Group 1 entities across their reporting journeys, including:

Establishing climate governance frameworks and capability training.
Guiding materiality assessments, climate risk identification, and climate scenario analysis.
Preparing entity-specific report templates and drafting full disclosure reports.

Starting points have varied widely: some clients arrived with mature voluntary programmes requiring gap analysis and translation into AASB S2; others were standing up sustainability committees and identifying climate risks for the first time.

Common challenges we have helped address include:

Navigating proportionality mechanisms, particularly when quantitative disclosure is required versus when qualitative explanation is appropriate.
Making effective use of transition relief for Scope 3 emissions and comparative information.
Ensuring scenario analysis is robust and defensible.
Preparing for the expanding assurance requirements ahead.

Our view is simple: organisations that treat this regime as an opportunity to genuinely understand climate risk rather than a compliance exercise will be better positioned with investors, lenders and regulators alike.

Looking Ahead

The reporting landscape will continue to evolve. As Group 2 and Group 3 entities are phased in through FY27 and FY28/29, the population of reporters will grow significantly, bringing heightened expectations around data quality, quantification, and scenario analysis maturity. Key developments on the horizon include:

Transition reliefs will fall away.
Scope 3 emissions will become mandatory.
Assurance coverage will progressively expand toward reasonable assurance over all climate disclosures.
Regulators will move from encouraging improvement to expecting it.

For organisations yet to report, or those looking to lift the quality of their next disclosure cycle, early preparation remains the strongest risk mitigant. Owl Advisory continues to work alongside clients at every stage: building foundational governance and risk identification frameworks, stress-testing impact disclosures, navigating the transition from limited to reasonable assurance, and embedding climate considerations into broader enterprise strategy.

This publication is a joint publication from Mallesons, and Mallesons Compliance Pty Ltd (ACN 672 547 027) trading as Owl Advisory by Mallesons. Mallesons Compliance Pty Ltd is a company wholly owned by the Mallesons Australian partnership. Mallesons Compliance Pty Ltd provides non-legal compliance and governance risk advisory services for businesses. Mallesons Compliance Pty Ltd is not an incorporated legal practice and does not provide legal services. Laws concerning the provision of legal services do not apply to Mallesons Compliance Pty Ltd.