ESG Regulations: Australia & New Zealand

Australia and New Zealand are implementing mandatory climate disclosure aligned with international standards, with Australia introducing comprehensive sustainability reporting requirements and both countries advancing net zero commitments.

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Australia

Mandatory Climate Disclosure

Effective: Phased from FY2025

Legislation: Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024

Applicability (phased):

• Group 1 (FY2025): ASX-listed entities, large proprietary companies, registered schemes (>$500M consolidated revenue, >$1B consolidated assets, >500 employees)
• Group 2 (FY2026): Medium entities (>$200M consolidated revenue, >$500M consolidated assets, >250 employees)
• Group 3 (FY2027): Smaller entities (>$50M consolidated revenue, >$250M consolidated assets, >100 employees)

Reporting Standards:

• Australian Sustainability Reporting Standards (ASRS) based on IFRS S1 & S2
• Developed by Australian Accounting Standards Board (AASB)

Key Requirements:

• IFRS S1: General sustainability-related financial disclosures
• IFRS S2: Climate-related disclosures (governance, strategy, risk management, metrics & targets)
• Scope 1 & 2 GHG emissions: Mandatory for all groups
• Scope 3 GHG emissions: Mandatory for Group 1 from FY2026, Group 2 from FY2027, Group 3 from FY2028
• Assurance: Limited assurance required from FY2027 (Group 1), FY2028 (Group 2), FY2029 (Group 3)

Primary Source: Treasury Laws Amendment Act 2024

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Australian Sustainable Finance Taxonomy

Status: Consultation phase, expected 2025-2026

Purpose: Classification system for environmentally sustainable economic activities

Alignment: Broadly aligned with IFRS Sustainability Standards, Singapore-Asia Taxonomy, and EU Taxonomy

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Modern Slavery Act 2018

Applicability: Entities with >$100M AUD annual consolidated revenue (Australian entities or foreign entities operating in Australia)

Requirements:

• Publish annual Modern Slavery Statement describing risks of modern slavery in operations and supply chains, and actions taken to address those risks
• Statement must cover:
  • Structure, operations, supply chains
  • Risks of modern slavery
  • Actions to assess and address risks
  • Effectiveness of actions
  • Consultation process (for reporting entities covering multiple entities)
• Approved by principal governing body, signed by responsible member
• Submitted to Australian Border Force, published on public register

Primary Source: Modern Slavery Act 2018

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APRA Climate Risk Guidance

Effective: November 2021

Applicability: APRA-regulated entities (banks, insurers, superannuation funds)

Requirements:

• Governance: Board and senior management oversight of climate-related financial risks
• Risk Management: Integrate climate risk into risk management framework
• Scenario Analysis: Assess resilience to climate-related risks under different scenarios
• Disclosure: Align with TCFD recommendations

Primary Source: APRA Prudential Practice Guide CPG 229

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Australian Net Zero Target

Target: Net zero emissions by 2050

Interim Target: 43% reduction by 2030 (vs. 2005 levels)

Key Policies:

• Safeguard Mechanism: Emissions cap for large emitters (>100,000 tCO₂e/year), declining baselines to drive reductions
• Renewable Energy: 82% renewable electricity by 2030
• Electric Vehicles: National EV strategy, charging infrastructure investment
• Hydrogen: Clean hydrogen industry development

Primary Source: Australia's Net Zero Plan

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ASX Corporate Governance Principles

Applicability: ASX-listed entities (comply-or-explain)

Principle 7: Recognise and Manage Risk

• Recommendation 7.4: Listed entity should disclose whether it has material exposure to environmental or social risks, and if so, how it manages or intends to manage those risks

Principle 3: Instil a Culture of Acting Lawfully, Ethically and Responsibly

• Recommendation 3.4: Listed entity should disclose any material exposure to environmental or social risks

Primary Source: ASX Corporate Governance Principles (4th Edition)

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New Zealand

Mandatory Climate Disclosure

Effective: FY2023 (first reports published 2024)

Legislation: Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021

Applicability: Climate Reporting Entities (CREs)

• Listed issuers (NZX equity security listings)
• Registered banks
• Licensed insurers
• Credit unions and building societies (>$1B NZD assets)
• Investment managers (>$1B NZD assets under management)

Estimated Impact: ~200 entities

Reporting Standards:

• Aotearoa New Zealand Climate Standards (NZ CS) developed by External Reporting Board (XRB)
• Based on TCFD recommendations

Key Requirements:

• NZ CS 1: Climate-related disclosures (governance, strategy, risk management, metrics & targets)
• NZ CS 2: Adoption of Aotearoa New Zealand Climate Standards (first-time adoption guidance)
• NZ CS 3: General requirements for climate-related disclosures
• Scope 1, 2, and 3 GHG emissions: Mandatory
• Scenario analysis: Assess resilience of strategy under different climate scenarios
• Assurance: Limited assurance required from FY2024

Primary Source: Financial Sector Amendment Act 2021

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New Zealand Emissions Trading Scheme (NZ ETS)

Launched: 2008 (world's first comprehensive ETS)

Coverage: Forestry, energy, industrial processes, waste, synthetic gases

Cap: Government sets emissions cap, declining over time to meet climate targets

Participants: Entities above threshold must surrender emission units for their emissions

Primary Source: NZ ETS

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New Zealand Climate Targets

Target: Net zero emissions by 2050 (excluding biogenic methane)

Biogenic Methane: 24-47% reduction by 2050 (vs. 2017 levels)

Interim Targets (Emissions Budgets):

• 2022-2025: 354 MtCO₂e
• 2026-2030: 305 MtCO₂e
• 2031-2035: 240 MtCO₂e

Primary Source: Climate Change Response (Zero Carbon) Amendment Act 2019

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NZX Corporate Governance Code

Applicability: NZX-listed issuers (comply-or-explain)

Principle 4: Reporting and Disclosure

• Recommendation 4.2: Issuer should provide meaningful information to investors about environmental, economic, and social sustainability risks and opportunities

Primary Source: NZX Corporate Governance Code

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Key Differences: Australia vs. New Zealand

Aspect	Australia	New Zealand
Disclosure Mandate	Phased from FY2025 (IFRS S1/S2)	FY2023 (TCFD-based NZ CS)
Applicability	Broad (>$50M revenue phased)	Narrow (~200 financial entities)
Scope 3	Phased from FY2026-2028	Mandatory from FY2023
Assurance	From FY2027 (phased)	From FY2024
Net Zero Target	2050	2050 (excl. biogenic methane)
Carbon Pricing	Safeguard Mechanism (large emitters)	NZ ETS (comprehensive)
Modern Slavery	Mandatory (>$100M AUD)	Voluntary

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Practical Implications for Companies

Australian Companies (Group 1-3):

• Prepare for mandatory IFRS S1/S2 disclosure (phased from FY2025)
• Measure Scope 1, 2, and 3 emissions (Scope 3 phased)
• Engage external assurance providers (required from FY2027)
• Monitor Safeguard Mechanism if large emitter (>100,000 tCO₂e/year)

New Zealand CREs:

• Already reporting under NZ CS (from FY2023)
• Ensure Scope 3 emissions measurement and disclosure
• Maintain limited assurance of climate disclosures

Companies Operating in Both Countries:

• Align Australian ASRS and New Zealand NZ CS disclosures (both based on IFRS/TCFD)
• Leverage common data collection systems

All Companies:

• Modern Slavery Statement (Australia, if >$100M AUD revenue)
• Engage with investors on climate strategy and net zero transition plans

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From ESG Library

• ESG Reporting Made Simple (IFRS/SASB) — IFRS S1/S2 implementation for Australia
• ESG & GRI Reporting Made Simple — Regional ESG reporting guidance

View all books →

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