Early Insights: Navigating Australia’s New Compulsory Sustainability Reporting Regime
- Alvin Fung
- 11 hours ago
- 3 min read
As Australia’s transition to mandatory climate-related financial disclosures gets underway, the Australian Securities and Investments Commission (ASIC) has released its first set of observations based on a review of initial sustainability reports.
With the crucial 30 June 2026 reporting season fast approaching, these early insights provide a vital roadmap for Group 1 entities and those preparing for upcoming phases.
Here is what the data shows and the six key areas your firm needs to focus on to ensure compliance.
Follow us on LinkedIn for the latest industry updates and trending news.
1. The Initial Rollout: By the Numbers
ASIC reviewed a subset of the first mandatory sustainability reports lodged under Chapter 2M of the Corporations Act for the financial year ending 31 December 2025. As of 6 May 2026, 259 reports had been submitted:
34 from listed entities
225 from unlisted entities
The activity was heavily concentrated across five key sectors, led by mining-related industries, followed by construction/materials/
manufacturing, financial services/insurance, oil and gas, and electricity/energy distribution.
2. The Good News
ASIC reported a noticeable increase in both the quantity and quality of climate-related financial information compared to previous voluntary disclosures. Standardized requirements under Australian Sustainability Reporting Standard AASB S2 are successfully driving greater consistency and comparability across the market. ASIC particularly commended entities using visual aids, diagrams, and tables to present clear information.
3. 6 Key Areas for Improvement
While the initial efforts are commendable, ASIC identified six critical compliance gaps that reporting entities must address to strengthen the quality of their disclosures:
Conflicting Disclaimers Are Not Permitted: Some entities included boilerplate disclaimers stating that users should not rely on the report for investment decisions or denying responsibility for accuracy. ASIC explicitly stated that disclaimers conflicting with the statutory framework of Chapter 2M are not permitted as they risk misleading users.
Leverage 'Reasonable and Supportable' Data: The information available to entities to identify climate-related risks must include "past events, current conditions, and forecast future conditions". ASIC noted instances where companies had previously disclosed financial impacts from extreme weather events (e.g., in ASX announcements) but failed to factor these past events into their forward-looking risk assessments.
Be Transparent About Assumptions & Judgements: Don't make users guess. Reports must provide clear, effective, and proximate disclosures regarding judgements, assumptions, and areas of measurement uncertainty so users understand the basis for forward-looking information.
Don't Let Voluntary Data Obscure Material Insights: While additional climate-related information can be included for fair presentation, it must not obscure the mandatory, material financial disclosures required under AASB S2. ASIC suggests using index tables to keep information distinct and navigable.
Strict Rules Around Cross-Referencing: If you cross-reference information outside the core report (such as corporate websites), the referenced report must be available on the same terms and at the same time. Furthermore, you must precisely specify which part of the external document is being incorporated.
Properly Define 'Climate-Related Targets': Entities are reminded that the definition of a climate-related target under AASB S2 extends to targets they are required to meet by law or regulation. This means greenhouse gas emissions targets—such as the Safeguard Mechanism—must be factored into your disclosures.
4. What’s Next?
ASIC’s review of the December 2025 cohort will continue, with final observations slated for publication in the second half of 2026. In the meantime, regulatory bodies are actively engaging with the market and participating in government consultations to streamline reporting burdens while maintaining core compliance.
5. The Bottom Line
Mandatory sustainability reporting is no longer a future compliance box to tick—it is an active regulatory reality. Proactive preparation, robust data collection, and strict adherence to AASB S2 guidelines are essential to avoid regulatory scrutiny.
Source of information: This post highlights early observations released by ASIC on 18 May 2026 to assist entities ahead of the 30 June 2026 reporting window.
Disclaimer
This article reflects publicly available information regarding the exposure of draft legislation as at the date of publication and is general in nature. It does not constitute tax, financial, or legal advice and should not be relied upon without obtaining professional advice tailored to your specific circumstances. To discuss how these proposed changes may affect you or your business, please contact our advisory team at Wis Australia.
Liability Limited By A Scheme Approved Under Professional Standards Legislation.
