ASIC Issues Early Observations on Australia's First Mandatory Sustainability Reports Ahead of June 2026

Australia's corporate regulator has released early observations from its review of the first sustainability reports lodged under the country's mandatory climate disclosure regime, identifying six key areas where reporting quality needs to improve ahead of the 30 June 2026 reporting season. The Australian Securities and Investments Commission's review focused on a subset of Group 1 entities, the largest companies required to prepare sustainability reports for financial years commencing on or after 1 January 2025, with some having filed reports for the December 2025 year-end. While ASIC welcomed the initial reports and acknowledged the significant effort by preparers, it identified recurring compliance gaps around disclaimers, climate risk identification, assumptions disclosure, information clarity, cross-referencing and climate target definitions.

 

Six Early Observations from the First Reports

 

ASIC's most prominent concern relates to disclaimers that conflict with the statutory framework of Chapter 2M sustainability reporting. The regulator found instances where disclaimers within or adjacent to sustainability reports indicated that users should not rely on the information for investment decisions, or that entities took no responsibility for the accuracy or completeness of certain content. Such disclaimers are not permitted under the statutory framework and may confuse or mislead users, running counter to the fundamental purpose of mandatory disclosure.

The second observation addresses the scope of reasonable and supportable information that entities must use to identify climate-related risks. ASIC found instances where entities had previously disclosed financial impacts from extreme weather events in prior financial years through financial reports or ASX announcements but had not identified or disclosed similar risks impacting future prospects. The standard requires that reasonable and supportable information include past events, current conditions and forecast future conditions, meaning that prior disclosed financial impacts should logically inform forward-looking risk identification.

 

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Assumptions, Cross-Referencing and Target Definitions

 

The third observation concerns the clarity of judgements, assumptions and measurement uncertainty disclosures. While some entities disclosed their assumptions, others left users to draw their own conclusions about why information was presented in a particular way, including how proportionality mechanisms under the standard had been applied. Clear disclosure of assumptions and estimation uncertainty is important for supporting user understanding of the basis for forward-looking information, particularly where scenario analysis and transition planning are central to the report.

On cross-referencing, ASIC found instances where entities failed to meet requirements by referencing information on external websites or reports not published by the entity, or by failing to precisely specify the part of another report being incorporated. A sustainability report can only cross-reference to another report published by the entity if that report is available on the same terms and at the same time as the sustainability report. Where entities cross-reference other reports they have prepared, ASIC strongly encourages lodgement of those documents together with the sustainability report.

 

Material Information and Climate Target Disclosure

 

A fourth concern is the risk of material climate information being obscured by additional voluntary disclosures that go beyond what is required under the standard. The regulator found instances where material information was not clearly distinguishable from supplementary climate content, potentially reducing the decision-usefulness of the report for investors. Index tables that set out the precise location of required information can help address this issue and are encouraged.

On climate targets, ASIC observed varied approaches to how entities determine what constitutes a climate-related target under the standard, particularly regarding legally mandated targets. The definition extends to quantitative and qualitative targets required to be met by law or regulation, including greenhouse gas emissions targets under Australia's Safeguard Mechanism. Entities operating under the Safeguard Mechanism should therefore assess whether their compliance obligations constitute climate-related targets for reporting purposes, a conclusion not universally applied in the first round of reports.

 

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Outlook for Australian Sustainability Reporting

 

ASIC's review of December 2025 sustainability reports will continue over the coming months, with the regulator indicating it may engage directly with reporting entities about their disclosures. Final observations from the review process will be published in the second half of 2026, providing a more comprehensive assessment of compliance across the full Group 1 cohort. The regulator also confirmed it will participate in the Australian government's consultation on proposed reforms to reduce reporting burden while maintaining core sustainability requirements, which was announced alongside the 2026 Budget.

The early observations signal that while mandatory sustainability disclosure has driven meaningful improvements in the quantity and consistency of climate-related financial information, compliance quality remains uneven across the first wave of preparers. Companies approaching the June 2026 reporting deadline should treat ASIC's six observations as a practical compliance checklist, ensuring that disclaimers, risk identification, assumption disclosure, information structure, cross-referencing and target definitions all meet the requirements of Australian Sustainability Reporting Standard AASB S2. Regulatory engagement with non-compliant reports is expected to intensify as the regime matures.

 

Source: ASIC Newsroom