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By: Andrew Rigele, Samantha Sing Key
15 Apr 2025 25 min read
The purpose of this Alert is to draw attention to Regulatory Guide RG 280 Sustainability reporting (RG 280 or regulatory guide), published by the Australian Securities and Investment Commission (ASIC) on 31 March 2025.
The regulatory guide, finalised from the draft published on 7 November 2024, explains ASIC’s interpretation of the sustainability reporting requirements under the Corporations Act 2001 (the Corporations Act, or the Act) and how they intend to administer and enforce the requirements of the Act as it relates to sustainability reporting. ASIC has made it clear that they expect entities to engage with the new sustainability reporting requirements and take steps to ensure they will be ready to comply with them as they are phased in.
The regulatory guidance impacts a wide range of entities within Australia, including entities that are not subject to mandatory sustainability reporting.
This Alert is heavily based on Regulatory Guide RG 280 Sustainability Reporting. Certain additions/amendments have been made for clarity and/or inclusion of additional guidance. This is not an exhaustive list of all of the regulatory guidance and does not replace reading the guide itself.
Sustainability reporting requirements were introduced into the Corporations Act following the enactment of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 in September 2024.
The Australian Sustainability Reporting Standard, AASB S2 Climate-related Disclosures (AASB S2), was made by the Australian Accounting Standards Board (AASB) for the purposes of the Corporations Act. The AASB also issued AASB S1 General Requirements for the Disclosure of Sustainability-related Financial Information (AASB S1) as a voluntary sustainability reporting standard.
This Alert does not cover the requirements of AASB S1 or AASB S2. For an understanding of the requirements of AASB S1 and AASB S2, please refer to our publication Unpacking Australian Sustainability Reporting.
ASIC published a consultation paper, Consultation Paper CP 380 Sustainability reporting, and a draft regulatory guide, RG 000 Sustainability reporting, on 7 November 2024. For information on the draft regulatory guide, see our previous alert. Following the comment period and consideration of the feedback, ASIC published RG 280 Sustainability reporting and Report 809 Response to submissions on CP 380 Sustainability reporting.
In the regulatory guide ASIC have used the term ‘sustainability-related information’ to refer to information about sustainability. This term is not limited to sustainability-related financial information. It may also include sustainability-related information disclosed under other sustainability reporting standards or frameworks.
By contrast, ASIC has used the term ‘sustainability-related financial disclosures’ or ‘sustainability-related financial information’ to refer to information about the entity’s sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium and long term, including information about the entity’s governance, strategy and risk management in relation to those risks and opportunities, and related metrics and targets. This would include information prepared in accordance with AASB S1 and/or AASB S2.
This Alert uses the terms ‘sustainability-related information’, and ‘sustainability-related financial information’ in the same way.
Entities must prepare a sustainability report if they are required to prepare an annual financial report under Ch 2M of the Corporations Act, and if they meet one of the sustainability reporting thresholds under s292A. Entities may be captured by any of the following three ways:
The regulatory guide clarifies how registrable superannuation entities (RSEs), registered schemes, and retail Corporate Collective Investment Vehicles (CCIVs) should interpret whether they are obliged to prepare an annual sustainability report.
RSEs, registered schemes and retail CCIVs may be required to prepare a sustainability report for the financial year commencing from 1 July 2026 if the value of assets controlled at the end of the financial year of the entity, and the entities it controls, is equal to or greater than $5 billion. The term ‘value of assets’ must be calculated in accordance with accounting standards in force at the relevant time: see the Corporations Act section 292A(7)(b).
The value of assets threshold under s292A(6) is not applicable to entities that are not RSEs, registered schemes or retail CCIVs: see s292A(6)(a). For example, it would not apply to investor directed portfolio service providers, RSE licensees, responsible entities, corporate directors of retail CCIVs or trustees of unregistered managed investment schemes.
In response to feedback on CP 380, the regulatory guide confirms that a responsible entity, RSE licensee, or retail CCIV that meets the corporate size threshold or the emissions threshold (even if it does not meet the $5 billion value of assets threshold under s292A(6)) must prepare a sustainability report.
ASIC has included guidance in RG 280 for entities who are uncertain whether they will meet the sustainability reporting thresholds at the end of the financial year.
This may be due to mergers and acquisitions occurring during the financial year, or substantial fluctuation or variability in revenue or employee numbers. The regulatory guide explains that sustainability reporting requirements crystallise at the end of the financial year. Specifically, RG 280.34 states that entities should establish adequate systems to assess whether acquisitions, restricting or shifting market or economic conditions will result in a change to the entity’s reporting status.
ASIC has included guidance to assist entities in determining whether their revenue, assets and employees satisfies the corporate size thresholds. The guide states that, when determining whether an entity has satisfied the corporate size threshold:
ASIC notes that the concepts of ‘revenue’, ‘assets’ and ‘employees’ have the same meaning as the equivalent concepts in s45A(3). These same concepts are used to determine whether a company is a large proprietary company under s45A(3).
In certain circumstances, a subsidiary that is part of a consolidated entity or an entity that is part of a stapled group is not be required to prepare a sustainability report. These circumstances are:
ASIC clarified that the parent entity must be a Ch 2M entity that is required to prepare consolidated financial statements to have the option of preparing a consolidated sustainability report under s292A. For example, a foreign parent entity does not have the option of preparing a consolidated sustainability report under s292A(2) on behalf of the consolidated entity for a financial year, because the foreign parent entity is not a Ch 2M entity.
Under the Corporations Act, an entity that is required to prepare an annual sustainability report is also required to keep written sustainability records that must be retained for 7 years after completion of the related report.
The regulatory guide explains that this comprises documents and working papers that explain the methods, assumptions and evidence from which the sustainability report (apart from the directors’ declaration) are made up. The sustainability records should be available on request by ASIC, and will need to be provided to auditors promptly to support the auditor’s report on the sustainability report.
The nature of this documentation can be broad and may include:
ASIC has clarified that entities may store sustainability records electronically if they are capable at any time of being reproduced in written form, and when required to be inspected the electronic records must be convertible into hard copy and made available within a reasonable time.
ASIC’s regulatory guide explains how the directors’ duties outlined in the Corporations Act, to exercise their powers with the care and diligence that a reasonable person would exercise in the circumstances, can be applied to sustainability reporting.
ASIC has clarified that the guidance does not impose new obligations on directors and is intended to help directors of reporting entities understand their existing obligations in light of the sustainability reporting requirements.
ASIC details in RG 280.55, that directors of reporting entities should have an understanding about the entity’s climate-related risks or opportunities and the reporting entity’s sustainability reporting obligations. Additionally, directors should apply a critical lens to the disclosures proposed in the sustainability report, such as questioning the appropriateness or completeness of methodologies, inputs and assumptions used to support disclosures.
Directors of reporting entities should require the reporting entity to establish:
To assist in the transition, the Corporations Act introduced modified legal liability settings. The legislation created a series of ‘protected statements’, for which no legal action other than criminal action, or action by ASIC, can be brought in relation to protected statements made in the sustainability report, or the auditor’s report on the sustainability report. The modified liability settings apply to areas generally considered to involve a high degree of judgement, estimates and outcome uncertainty.
ASIC’s guidance confirms that for sustainability reports prepared for the financial years commencing between 1 January 2025 and 31 December 2027, modified liability settings apply, in specific circumstances, to statements made about:
Additionally, for sustainability reports prepared for a financial year commencing between 1 January 2025 and 31 December 2025, modified liability settings apply, in specific circumstances, to statements relating to climate that, at the time they are made, are about the future.
This modified liability does not apply to an action, suit or proceeding that is criminal in nature, or brought by ASIC.
Importantly, the regulatory guide clarifies that these modified liability settings only apply when the statement is required to be made under the Corporations Act or Commonwealth Law, and is:
(a) the same as a protected statement; or
(b) differs from a protected statement only in so far as it contains updates or corrections to the protected statement.
The modified liability settings do not extend to statements voluntarily made outside a sustainability report where a protected statement is reproduced in an investor presentation or promotional material. Modified liability settings also do not extend where a statement summarises or expands upon the content of a protected statement, where a statement is included by cross-reference in the sustainability report, or where a statement comprises updates or corrections unless those updates or corrections are included in a revised version of a protected statement required to be made under a Commonwealth law.
Under the Corporations Act and the Australian Securities and Investments Commission Act 2001 (ASIC Act), some representations about future matters will be taken to be misleading unless there are reasonable grounds for making the representations, see s769C of the Corporations Act and s12BB of the ASIC Act.
The regulatory guide clarifies ASIC’s expectation that all forward-looking information in climate statements must comply with Appendix D of AASB S2, which sets out both the fundamental and enhancing qualitative characteristics of useful climate-related financial information. These are:
The qualitative characteristics of useful climate-related information are an integral part of AASB S2 and have the same authority as the rest of the standard. Entities are required to comply with all of the requirements in Appendix D, as well as the other requirements of AASB S2, in order for an entity to be able to make an explicit and unreserved statement of compliance with AASB S2.
s296B(1) of the Corporations Act allows certain entities to lodge a sustainability report that states:
Entities may lodge a climate statement under s296B(1) if they satisfy all of the below criteria:
The regulatory guide clarifies that reporting entities that lodge a climate statement under s296B(1) must:
Such entities should establish robust processes to continue to assess, in accordance with AASB S2, whether there are any material financial risks or opportunities relating to climate for the financial year. This will enable such entities to ensure that they meet their sustainability reporting obligations under s296A(1) of the Corporations Act for any subsequent financial year that their assessment, in accordance with AASB S2, identifies material financial risks and opportunities.
ASIC has elaborated in the guide that under AASB S2, an entity must disclose material information about the climate-related risks or opportunities that could reasonably be expected to affect the entity’s prospects. The information is material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that primary users of general purpose financial reports make on the basis of those reports.
AASB S2 permits a reporting entity’s sustainability report to cross-reference to information in another document prepared by the reporting entity, if it complies with paragraphs 63 and B45–B47 of Appendix D of AASB S2. In these circumstances, the regulatory guide states that reporting entity is strongly encouraged to lodge the other document with their sustainability report (if it has not already been lodged with ASIC).
ASIC notes that AASB S2 does not permit a reporting entity’s sustainability report to cross-reference information in a report prepared by another entity. Additionally, the guide states that modified liability settings do not apply to information included by cross-reference in the sustainability report.
Up until now, sustainability-related information has been included in corporate reporting under many names. This has historically included ‘sustainability reports’ or ‘ESG reports’, or subsections as part of the annual report with similar titles. The Corporations Act now establishes a precise statutory meaning of the term ‘sustainability report’ under s9 of the Corporations Act.
ASIC’s regulatory guide confirms that:
For reporting entities considering voluntary disclosure of additional sustainability-related information in the sustainability report, it is important to note that the guidance confirms that the ‘protected statement’ modified liability settings do not apply to statements in a sustainability report that are not made for the purposes of complying with a sustainability standard.
Additionally, the inclusion of additional sustainability-related information in the sustainability report may have implications for the mandatory sustainability assurance of the sustainability report. Entities are encouraged to engage early with their assurance provider.
ASIC provided general guidance on climate scenario analysis. In line with the Corporations Act, the regulatory guide confirms that reporting entities must use a minimum of two climate scenarios, including a 1.5°C warming scenario and a scenario well exceeding 2°C warming above pre-industrial levels. To avoid doubt, ASIC notes in the regulatory guide that an increase of 2.5°C or higher would well exceed 2°C above pre-industrial levels.
In response to feedback that a global warming scenario of 1.5°C above pre-industrial levels is likely to be surpassed, ASIC emphasised that the key objective of using the two mandated climate scenarios is to ensure that users have the benefit of information about the reporting entity’s climate resilience and material climate-related financial risks and opportunities.
Using a 1.5°C warming scenario, even if it may be surpassed, allows for a resilience assessment in a scenario that contemplates rapid global decarbonisation in the near term. Whereas the application of a higher global warming scenario well exceeding 2°C allows for a resilience assessment in a scenario that contemplates more pronounced climate impacts over the medium to long term.
The combination of both global warming scenarios provides further insight for users into the reporting entity’s potential climate resilience and climate-related financial risks and opportunities under both high-end physical risk and high-end transition risk.
In response to feedback seeking more detailed guidance on reporting scope 3 greenhouse gas emissions, ASIC have clarified their position regarding specific challenges for entities reporting their scope 3 emissions (including financed emissions).
The regulatory guide clarifies that:
ASIC notes that the accuracy of estimation techniques may improve over time, as the quality and the availability of data for reporting scope 3 greenhouse gas emissions (and the cost and effort in obtaining it) improves. Entities should use all reasonable and supportable information that is available to the entity at the reporting date without undue cost and effort.
The regulatory guide establishes an expectation that all entities, including those that are not currently required to prepare an annual sustainability report, are encouraged to:
ASIC’s guidance applies where existing disclosure obligations (e.g. s299A, s710, s1013D and s1013E) require the inclusion of sustainability-related financial information in a disclosure document. The guidance does not require compliance with the sustainability standards when preparing prospectuses, PDSs or other disclosure documents.
ASIC notes that these practices facilitate the disclosure of high-quality sustainability-related financial information outside the sustainability report. Additionally, the use of defined terms should enhance comparability for users. ASIC’s reviews of sustainability-related disclosures will extend to information from sustainability reports reproduced in other documents lodged with ASIC, such as disclosure documents or PDS documents. ASIC have confirmed they will likely carefully scrutinise information that includes or references information from a sustainability report.
The purpose of a listed entity’s Operating and Financial Review (OFR) is to provide information that members of the listed entity would reasonably require to make an informed assessment of the operations, the financial position, and the business strategies, and prospects for future financial years, of the entity.
Therefore, it is likely that there may be some overlap between the climate-related risks and opportunities disclosed in the sustainability report, and the business strategies and prospects for future years of the listed entity expected to be disclosed in the OFR.
The regulatory guidance additionally notes:
Issuers must disclose sustainability-related financial information in a s710 prospectus if investors and their professional advisers would reasonably require this information to make an informed assessment of the rights and liabilities attaching to the securities offered, and the assets and liabilities, financial positions and performance, profits and losses and prospects of the entity issuing the securities.
If s710 requires this disclosure, ASIC notes:
For reporting entities, if s710 requires an issuer to disclose climate-related financial information, and the issuer has lodged a sustainability report with ASIC for the most recent financial year, the issuer should:
The guidance confirms that a PDS must include sustainability-related financial information if a person would reasonably require this information in making a decision (as a retail client), or if this information would have a material influence on the decision of a reasonable person (as a retail client), whether to acquire the financial product.
ASIC has provided further information about how its proportionate and pragmatic approach to supervision and enforcement of the sustainability reporting requirements will be implemented during the early years of mandatory sustainability reporting.
The Regulatory Guide highlights that:
ASIC has stated it will review sustainability reports and undertake an annual surveillance program on sustainability reporting, modelled on its existing annual financial reporting surveillance program. ASIC will publicly report on its findings in order to drive continued improvement in the reporting standards. Reporting entities may find it useful to consider these future reports, which may include commentary on illustrative real-world examples.
ASIC has highlighted that it will consider the underlying policy objectives of the sustainability reporting requirements, the users of the report, and the established policy and precedents in relation to sustainability reporting relief and audit relief.
In particular, the regulatory guide makes it clear that ASIC will not necessarily grant sustainability reporting relief merely because an entity has been granted, or has the benefit or, comparable financial reporting relief. Specific reasons that are unlikely to justify relief from sustainability reporting requirements include:
It is expected that entities will implement sustainability reporting processes that enable the entity to meet its reporting deadlines under the Corporations Act, including ensuring the external auditor has sufficient time to complete the audit. The regulatory guide states that ASIC will only grant an extension of time to lodge a sustainability report in rare circumstances. This is consistent with their approach to financial reporting.
The guide also reminds entities that applications for relief from the sustainability reporting requirements must be submitted prior to the deadline for lodging the sustainability report, as the relief powers are prospective only.
Entities that currently rely on relief from the requirement to prepare a financial report under a legislative instrument are not required to prepare a sustainability report. This is because the requirement to prepare an annual sustainability report requires the entity to have an obligation under Ch 2M of the Corporations Act to prepare an annual financial report.
However, if the legislative instrument provides a different kind of relief (e.g. deferral of obligations to report for a financial year), the sustainability reporting requirements will continue to apply unless relief in relation to those requirements is also granted.
If you wish to discuss any of the information included in this Sustainability Reporting Alert, please get in touch with your local Grant Thornton Australia contact or a member of the Sustainability Reporting Advisory team at sustainability.reporting@au.gt.com.
If you wish to discuss any of the information included in this Technical Accounting Alert, please get in touch with your local Grant Thornton Australia contact or a member of the National Assurance Quality Team using the link below.
AASB S2025-1 Amendments to Greenhouse Gas Emissions Disclosures, issued by the Australian Accounting Standards Board (AASB) to amend AASB S2 Climate-related Disclosures (AASB S2)
The purpose of this Alert is to draw attention to the National Climate Risk Assessment report (or NCRA), delivered by the Australian Climate Service on 15 September 2025.
Following recent decisions made at the Australian Accounting Standards Board (AASB) meetings, we now have a very clear sense of what the final Australian Sustainability Reporting Standards (ASRS) will look like.
