Institute of Public Accountants welcomes Commonwealth Government climate reporting legislation

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 that provides more certainty for climate reporting received Royal Assent on 17 September 2024.

The new legislation provides more certainty by establishing when the climate statements should be prepared, how they should be prepared, and which entities should prepare them.

The Institute of Public Accountants (IPA) is pleased to welcome the newly passed climate reporting legislation, marking a critical step towards ensuring that climate-related financial disclosures are transparent and standardised.

“We fully support the legislation's pragmatic requirements, particularly the phased-in approach of initially requiring larger entities to prepare climate reports and aligning the domestic climate reporting frameworks with those internationally. Climate statements will now be prepared using the Australian Accounting Standards Board (AASB) Sustainability Reporting Standards. The statements are designed to align with those prepared under the global standards of the International Sustainability Standards Board while making necessary adjustments for Australia,” Professor Andrew Conway, CEO of IPA Group, said.

Key features of the legislation

Climate reporting will be phased-in based on the size of the entity, using thresholds similar to those for annual financial statements. The largest entities (Group 1) will begin reporting from 1 January 2025, followed by Groups 2 and 3 in subsequent years.

Smaller entities in Group 3 that do not have material climate-related financial risks will not be required to prepare full climate statements but must provide a statement explaining their assessment.

The IPA recognises that implementing climate reporting presents challenges and requires significant investments in expertise, systems, and processes, particularly for smaller entities in Group 3, which includes IPA members. Small to medium entities often lack the resources to meet the new requirements.

“We take a broader, principles-based approach, recognising that climate reporting serves a critical function at both the micro and macro levels. For individual entities, it provides insight into risks and opportunities related to climate change, enhancing decision-making for both domestic and international investors. At a macro level, the legislation supports Australia’s commitment to reducing emissions and achieving net-zero emissions by 2050,” Professor Conway said.

“We believe that if an entity is large enough to prepare audited financial statements, it should also be large enough to prepare climate statements. This includes entities at the smaller end of the Group 3 threshold. Additionally, many Group 3 entities are likely to be involved in the value chain of larger Group 1 and 2 entities, requiring them to provide greenhouse gas emission data to meet Scope 3 GHG disclosures,” he said.

Rather than exempt Group 3 from climate reporting, the IPA advocates for a more proportionate approach to this complex issue. Simplifying the reporting requirements, rather than removing them entirely, would ensure that smaller entities can still participate without the disproportionate burden of complex climate disclosures.

The IPA has advocated for the AASB to develop a tiered system for climate reporting akin to the differing tiers for financial reporting—one for larger entities and another simplified version for smaller, less complex entities.

The IPA is pleased to note that the AASB has acknowledged stakeholder concerns is committed to addressing the scalability and cost-benefit challenges faced by smaller and not-for-profit entities. The AASB will finalise the Australian Sustainability Reporting Standards S1 and S2 for Group 1 entities in the near future.

The IPA will continue to work with the AASB to simplify climate disclosures for businesses falling under the Group 3 reporting threshold.

Media Contact

Zachary Gardner
General Manager Public Affairs
Institute of Public Accountants
M: 0498 645 610
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