Australia’s new climate-related financial disclosure regime

It’s difficult to act on what you can’t see, and this week the Australian parliament added an unprecedented level of transparency and focus to Australia’s climate ambition by passing two pieces of key legislation.

Consequently, the long-awaited climate-related financial disclosures and Net Zero Economy Authority (NZEA) are now embedded in Australia’s institutional fabric.

The first will allow all businesses and investors to see what’s ahead so they can act. The other will focus on the regions, workers and communities where support is most urgently needed, and help coordinate large-scale investment.

Together, climate-related disclosures and the NZEA send a clear signal – from Australia’s financial regulators, industrial regions and wider economy to the world – that the nation is serious about the transition. It’s serious about a transition that’s not only swift, but thorough – and these measures will help it be coordinated, transparent and fair.

Over the past 15 years, the work of Climateworks Centre has shown that a coordinated transition can deliver significant benefits for communities, industries and the entire economy.

As of January 2025, a major step up in climate reporting will be required by large Australian companies. Australia will become the latest country to join the “new normal” by requiring companies to report on their climate risks and opportunities.

Climate-related financial disclosures are a critical first step to embed credible decarbonisation pathways into corporate strategy and spur emissions reductions.

From January, companies will be required to disclose climate transition plans, including governance, strategy, risk management and targets regarding emissions. The disclosures will also require organisations to undertake climate resilience assessments, and at least one of those scenarios must align with the science-based goal of limiting global warming to 1.5°C.

Read more: Making Australia's sustainable finance reforms count

Companies that see the disclosures as an opportunity to get ahead and increase business resilience – rather than just a compliance exercise – stand to gain the most.

Businesses can future-proof their strategies, mitigate greenwashing risks, and strengthen their transition plans by aligning their actions and investments with credible, country and sector-specific pathways.

Australia has guidance on this from the Climate Change Authority’s national sector pathways review, published last week. Further guidance is available through Treasury’s Sustainable Finance Roadmap, and forthcoming Taxonomy.

Forward-thinking organisations are investing in upskilling and capacity-building, to get ready for these internationally-aligned reporting and planning requirements.

To get started, a key new skill is knowing how to set 1.5°C-aligned targets, and what are the most appropriate technologies to invest in to reduce emissions at the rate required. From there, companies can draw on their traditional strategy and governance skills to embed the targets and actions in their business plan.

Any company that fails to adequately identify and address its climate risks and opportunities leaves itself vulnerable to disruption, both from physical impacts of climate change, but also transition risks to its business.

Disclosing a credible climate transition plan is an opportunity to showcase a company’s credentials to the market.

The reality is, in a world moving towards net zero as fast as possible, it could be all too easy for companies, industries and entire communities to get left behind.

That is where the work of the NZEA comes into play. It will focus on the regions subject to the greatest transformation as Australia and the global economy races towards net zero.

The NZEA exists to ensure Australia’s regions, businesses, communities and workers are supported in the shift to a low-carbon economy.

It originally sat within the Department of Prime Minister and Cabinet, and now continues as a statutory authority, with an initial focus on emissions-intensive industrial regions.

Climateworks Centre co-convened the four-year Australian Industry Energy Transitions Initiative that found it’s possible to eliminate more than 90% of emissions in Australia’s major heavy industry supply chains of iron and steel, aluminium, liquified natural gas, chemicals, and mining of other metals such as copper and lithium.

It also showed that Australia’s heavy industries and associated emissions are clustered in relatively few places.

Five industrial regions – Illawarra, Hunter, Kwinana, Gladstone, and the Pilbara – account for one-eighth of Australia’s total emissions, equivalent to the emissions of every car and light commercial vehicle across the country.

The NZEA is designed to take a place-based approach to ensure the industries and communities our regions support can successfully transition to net zero, and attract investment at the scale and pace needed to remain competitive in a decarbonised world.

Its statutory role empowers it to work with local regions, state and territory governments, and the private sector, and it’s already being noted as a potential model for other jurisdictions to adopt.

The NZEA’s success will be measured in decent jobs, thriving zero-emission businesses, and the future prosperity of Australian regions and industries.

Major economies around the world are acting now to make the most of the new economic opportunities – demonstrating that planning for this transition is the “new normal”. Both pieces of legislation show Australia has joined the club.

Whether you’re a bank, a business, industrial worker or government, it’s clear Australia is in this global race. Australia has the resources to compete and clinch a top spot, if it gets the next few years right.

As our Olympians and Paralympians have shown us these past few weeks, Australia can punch above its weight, and these two new developments should help it earn a podium spot.

Monash is pioneering a path to a greener, smarter, more equitable and sustainable future, where emissions are lower, and the natural environment and humans thrive. We look forward to participating at COP29, where we aim to accelerate global action on sustainability, empowering diverse voices from across the Indo-Pacific and influencing superior policy outcomes across a broad range of issues. Find out more monash.edu/cop29