Australian Update

ASIC Publishes Regulatory Guidance for New Sustainability Reporting Requirements

On 31 March 2025, the Australian Securities and Investments Commission (ASIC) published its Regulatory Guide 280 Sustainability Reporting (RG280) following the introduction of Australia’s first climate-related financial disclosure regime and comprehensive public consultation with various stakeholders.

The new disclosure regime requires the preparation of a sustainability report containing climate-related financial information under Chapter 2M of the Corporations Act 2001 (Cth) (Corporations Act). RG280 provides practical guidance for companies, registered schemes, registrable superannuation entities, and retail corporate collective investment vehicles who are required to prepare these new sustainability reports.

RG280 includes guidance in relation to:

• Determining who must prepare a sustainability report under the Corporations Act;
• The content required in a sustainability report;
• Disclosing sustainability-related financial information outside the sustainability report (e.g. product disclosure statements); and
• ASIC’s administration of the sustainability reporting requirements.

In addition, ASIC has also been given additional powers to grant sustainability reporting and audit relief, and to issue directions to reporting entities where it considers a statement in a sustainability report is incorrect, incomplete or misleading.

ASIC Commissioner Kate O’Rourke has said “the publication of RG280 is a critical piece that supports the implementation of these sustainability reporting requirements passed by the Australian Parliament. We will continue to expand our broader suite of publications related to sustainability reporting over time as market practices evolve”.

S&P Platts to Launch Daily Benchmark for Australian Safeguard Mechanism Credits

S&P Platts is set to launch a daily market assessment for Australian Safeguard Mechanism Credits (SMCs) on 5 May 2025.

The Safeguard Mechanism reforms commenced on 1 July 2023 under the Safeguard Mechanism (Crediting) Amendment Act 2023 (Cth), allowing the Clean Energy Regulator (CER) to issue SMCs from January 2025 to certain designated large facilities (Safeguard Facilities) whose net emissions are below their legislated baseline targets. The regime has been designed to incentivise Safeguard Facilities to reduce their emissions beyond these baseline targets.

Safeguard Facilities that earn SMCs can sell them to other Safeguard Facilities, surrender them to stay within their baseline or retain them for future use until 2030. One SMC represents one tonne of carbon dioxide-equivalent emissions below a facility’s baseline. For more information on SMCs and Australia’s carbon credit regulatory framework, see our previous alert here.

S&P Platts’ new benchmark will reflect SMCs in the spot market following issuances from the CER. Its introduction is intended to improve price transparency and boost the confidence of carbon market participants in trading, compliance and investment decision-making. The launch comes as a welcome step in the evolution of Australia’s emissions reduction framework, allowing participants in the carbon credit market to better navigate compliance and employ investment strategies towards the country’s net-zero targets.

ASFI Launches Sustainable Finance Action Plan for 2025-2027

The Australian Sustainable Finance Institute (ASFI) has launched its Sustainable Finance Action Plan for 2025-2027 (Action Plan), aiming to align Australia’s financial system with sustainable and inclusive growth. The plan builds on the Australian Sustainable Finance Roadmap, which was introduced in 2020 to provide recommendations for improving Australia’s financial system to support sustainable development.

ASFI’s members, comprising 41 leading financial institutions with over AU$37 trillion in assets, are committed to integrating sustainability into their practices. The Action Plan emphasises embedding sustainability into leadership, integrating sustainability into practice, enabling resilience and building sustainable finance markets including by financing emissions reductions, increasing capital flows for climate adaptation, expanding financial innovation and promoting international collaboration to support sustainable finance objectives.

Some examples of the priorities that ASFI recommend include:

• The expansion of Australia’s mandatory climate disclosure regime;
• A clearer articulation of the requirements for sustainable financial product labelling;
• Changes to competition law to provide a more permissive scheme for sustainability collaborations and to streamline exemption processes for sustainability activities; and
• The explicit inclusion of sustainability-related considerations within directors’ duties under the Corporations Act to act with reasonable care, skill and diligence, and in good faith in the best interests of the company.

State of Net Zero Investment 2025 Report Highlights Australian Commitment to Climate Progress

On 2 April 2025, the State of Net Zero Investment 2025 Report (Report) was published by the Investor Group on Climate Change (IGCC). The Report revealed a strong commitment from Australian institutional investors towards climate progress, despite some current global anti-ESG sentiment. This comprehensive Report, covering data from 65 major superannuation and retail funds, represents AU$4.2 trillion in assets managed for 15 million Australian beneficiaries.

The Report highlights advancements in five of six key climate indicators, though notes there has been a decline in the number of investors with climate action plans, likely due to new minimum regulatory standards for transition plans. Interest in climate solutions, particularly renewable energy and green infrastructure, is on the rise. However, challenges such as policy uncertainty and a lack of suitable investment opportunities have emerged, reversing previous positive trends.

The CEO of IGCC emphasised the fiduciary duty of investors to protect financial interests by setting emissions targets and exploring climate solutions. Despite a mixed short-term outlook, increased policy certainty could enhance investor confidence in Australian growth industries.

The Report underscores the critical role of investors in transitioning to a low-carbon economy. The survey data, collected in late 2024, reflects ongoing industry discussions and trends expected to continue into the new year.

VIEW FROM ABROAD

Net Zero Banking Alliance Eases Climate Commitment Target

On 15 April 2025, the Net Zero Banking Alliance (NZBA), a coalition of over 120 global banks, announced a shift in its climate commitment from the 1.5°C target to a broader “well-below 2°C” goal, in alignment with the Paris Agreement. This decision reflects the challenges banks face in coordinating efforts and the slow progress in decarbonising key sectors like housing and aviation.

The NZBA’s adjustment is influenced by the slower-than-expected advancements in technology and policymaking. The NZBA Chair highlighted that the expectations from 2021 have not aligned with current realities. Economic and political headwinds, particularly from markets like the United States and United Kingdom, have also contributed to this shift, with major banks delaying or scaling back net zero targets.

Critics argue that this pivot undermines the credibility of voluntary climate commitments, especially since only 30% of major emitters have 1.5°C-aligned transition plans. Despite the controversy, NZBA leadership emphasises a shift from “target-setting to implementation”, offering practical tools and exploring alternate methods like carbon markets and avoided emissions accounting.

This decision marks a significant moment in the credibility and durability of private sector climate leadership, with potential implications for green finance and the pace of decarbonisation efforts.

EU Commission Eases Corporate Obligations Under New Deforestation Law

On 16 April 2025, the European Commission introduced revisions to the EU Deforestation Regulation (EUDR) to simplify compliance while maintaining environmental goals. The EUDR prohibits products linked to deforestation from entering the EU market, requiring companies to conduct due diligence on commodities such as palm oil, beef, timber, coffee, cocoa, rubber and soy, including derived goods like leather and chocolate. Companies must trace products to their origin and ensure no deforestation occurred post-2020.

The regulation, effective since June 2023, initially required large companies to comply by the end of 2024 and small businesses by June 2025.

In response to readiness concerns, the European Union delayed the compliance deadline by one year in October 2024, aligning with the EU’s Competitiveness Compass strategy to enhance productivity and reduce red tape. Key revisions include allowing annual submission of due diligence statements, reusing existing documentation and group-level reporting. These changes aim to reduce administrative costs by 30% and ease the compliance burden on companies.

The Commissioner for Environment emphasised the commitment to reducing administrative burdens while achieving the regulation’s goals of reducing global deforestation. The revisions reflect a collaborative approach with stakeholders to ensure effective implementation.

Nathan Bodlovich, Cathy Ma, Daniel Nastasi, Bernard Sia, Natalia Tan, Aibelle Espino, and Isaac Gilmore contributed to this article