Impact Policy Tracker Policy

Australian Sustainability Reporting Standards (ASRS): AASB S1 and AASB S2



As part of Australia’s Sustainable Finance Strategy released for open consultation in 2023, the Government proposed “improving transparency on climate and sustainability” as one of its three pillars, also laid out in their Sustainable Finance Roadmap. In parallel, the Australian Accounting Standards Board (AASB), an independent entity of the Government responsible for developing auditing and assurance standards, released a consultation document to gather input on the proposed Australian Sustainability Reporting Standards (ASRS). With encouragement from that consultation to align the ASRS with the ISSB’s S1 and S2 baseline, the ASSB approved the final ASRS after the Parliament passed the bill, with a  three-phased implementation approach, depending on companies’ size (gross revenue, consolidated assets and employees).

Highlights

  • Parliamentary process: unlike most jurisdictions where the authority to mandate sustainability reporting lies on the financial regulator (Ministry of Finance, Capital Markets Regulator and/or Central Bank), in Australia, this required legislative passing of the Treasury Laws Amendment Bill, amending the Corporations Act (and other 8 Acts). The Act mandated relevant entities to disclose their climate-related plans and financial risks and opportunities, in accordance with the ASRS.

  • “Climate first” approach: the Standards issued by the AASB after parliamentary approval included the mandatory, standalone, climate-only standard AASB S2 (“Climate-related Disclosures”) and the voluntary AASB S1 (“General Requirements for Disclosure of Sustainability-related Financial Information”) largely in line with IFRS S1 and S2 Standards, respectively.

  • Assurance requirements: from fiscal year 2030, a phased approach for assurance of all climate-related financial disclosures will be implemented, based on the Australian Standard on Sustainability Assurance (ASSA) 5000 approved by the Australian Auditing and Assurance Standards Board (AUASB), in line with the international equivalent, the International Auditing and Assurance Standards Board (IAASB)’s ISSA 5000.

  • Sustainability reporting guide: the Australian Securities & Investments Commission (ASIC), the regulator responsible for overseeing sustainability reporting practices, issued the “Regulatory Guide 280 Sustainability Reporting” with guidance for preparers to comply with their sustainability reporting obligations and indicating how the legislation is interpreted.

Inclusion of specific guidance for not-for-profit entities: ASSB S1 is also applicable for not-for-profit entities and includes Australian-specific guidance for such entities.

Government’s Role:
Market Regulator


Country:
Australia

Policy Type:
Sustainability Disclosure Standards

Year: 2023

Responsible Institution:
Australian Accounting Standards Board (AASB), Department of the Treasury, Parliament of Australia, Australian Securities & Investments Commission (ASIC), Council of Financial Regulators.

Sustainability Disclosure Regulations

What are Sustainability Disclosure Regulations?

Sustainability Disclosure Regulation requires financial market participants to report on their impacts on the economy, people, and planet, alongside financial information. To comply with the regulatory mandate, organisations must use Sustainability Disclosure Standards (SDS),which ensure that the information disclosed is comprehensive, verified, comparable and decision-useful. They can help organisations assess not only how sustainability-related risks and opportunities affect the short, medium and long-term enterprise value (single materiality; only financially-relevant information) but also how their operational impacts affect people and the planet (double materiality). The availability of such information is essential for investors and other key decision makers to integrate social and environmental factors into their investment and decision-making processes.

SDS are one of the most effective mechanisms to achieve comparable, consistent and reliable information on impact. Although companies can opt to report based on existing voluntary standards (such as those from the Global Reporting Initiative - GRI), in some jurisdictions publicly listed companies must abide by mandatory financial and non-financial (i.e. sustainability-related) disclosure requirements issued by financial regulators. These mandatory reporting standards are increasingly being implemented in different countries, both in developed and developing economies, most of which are either adopting the standards set by the IFRS Foundation’s International Sustainability Standards Board (ISSB) in full or working on local adaptations with local specificities to cater for specific nuances, capabilities, readiness and topics relevant to their local markets.