Practical guidance for reporting entities 17 min read
The Australian Securities and Investment Commission (ASIC) recently published its Regulatory Guide 280 Sustainability Reporting (RG 280) for entities required to prepare a sustainability report under Australia's new climate-related financial disclosure regime that came into operation on 1 January 2025 (the CRFD Regime).
We appreciate many will be familiar with the high level details of the CRFD Regime that are discussed in RG 280, so in this Insight we focus instead on what we see as the most useful practical guidance for reporting entities to come out of the guide. For broader background on the CRFD Regime, please see our earlier Insight.
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- Key takeaways
- Think global, disclose local: ASIC endorses ISSB guidance
- ASIC's guidance on the content of sustainability reports
- Don't take a narrow view of what constitutes 'sustainability records'
- Get ready for the continued spotlight on directors' duties
- Consider alignment with sustainability-related financial disclosures outside the sustainability report
- ASIC foreshadows a 'proportionate and pragmatic approach' to enforcement
- Is there relief in sight? ASIC provides limited guidance
- Contact the team
Key takeaways
- On 31 March 2025, ASIC issued RG 280, which provides a high level overview of the CRFD Regime, explains ASIC's role in administering and, where appropriate, enforcing the requirements under the Corporations Act 2001 (Cth) (the Corporations Act) and provides certain guidance regarding how ASIC will interpret specific aspects of the sustainability reporting requirements underlying the Corporations Act.
- In particular, ASIC has provided helpful guidance on:
- the extent to which AASB S2 Climate-related Disclosures (AASB S2) allows for a sustainability report to incorporate material by cross-reference, and ASIC's requirements with respect to cross-referenced material;
- labelling of sustainability reports and ASIC's expectations when mandatory climate disclosures are housed in the one report alongside voluntary sustainability disclosures; and
- ASIC's expectations with respect to sustainability record keeping, including records relating to how proportionality mechanisms have been applied.
- While RG 280 does provide guidance in certain areas, there are a number of remaining areas of uncertainty for reporting entities, including on the application of proportionality mechanisms.
- Boards should be prepared for the continued spotlight on directors' duties with respect to climate change, with ASIC flagging its expectations of boards in relation to the CRFD Regime, as well as climate risks and opportunities more generally.
- ASIC has been careful about the extent of guidance it has provided on potential individual relief applications, but RG 280 does make it clear that its jurisdiction to grant relief will not necessarily be invoked merely on the basis that an entity is privately owned, closely held by only a small number of members or has limited known external users, or users of the climate-related financial information already have access to it.
- In respect of the question as to whether a foreign parent can voluntarily undertake consolidated reporting for the whole corporate group, ASIC has highlighted that the consolidated group exemption will not apply to a foreign parent that voluntarily elects to prepare a sustainability report for a consolidated entity that includes an Australian subsidiary (where that foreign parent is not a Chapter 2M reporter).
Think global, disclose local: ASIC endorses ISSB guidance
While RG 280 does not contain prescriptive or detailed application guidance on the AASB S2, ASIC indicates that reporting entities should refer to the ISSB's accompanying guidance and educational materials developed to support application of IFRS S2 Climate-related Disclosures (IFRS S2), on which AASB S2 is based. ASIC states these may be useful for reporting entities to comply with AASB S2.
| Allens' tip: we encourage reporting entities to regularly check the IFRS website for new guidance materials being published by the ISSB (see link to guidance materials for IFRS S2). For example, 'Sustainability-related risks and opportunities and the disclosure of material information', provides helpful detail on the principle of materiality, one of the key conceptual foundations of AASB S2. |
ASIC's guidance on the content of sustainability reports
Climate statements will, by their nature, contain a significant number of forward-looking statements. ASIC acknowledges that one of the proportionality mechanisms embedded in AASB S2 (the requirement to utilise reasonable and supportable information available to the entity without undue cost and effort) reflects that the quality and availability of data to support forward-looking climate disclosures will evolve over time. While this represents a recognition of limitations faced by disclosing entities, it also implies an expectation for continuous improvement.
ASIC also emphasises the need for disclosing entities to comply with continuous disclosure obligations, including in relation to forward-looking statements. In so stating, ASIC is telegraphing that forward-looking statements in a sustainability report could establish a baseline against which new, materially price-sensitive disclosures may be triggered—eg if a significant climate-related opportunity disclosed in an annual sustainability report were not to materialise.
| Allens' tip: all reporting entities will need to check, from time to time, whether the information and assumptions they relied on in the past for forward-looking climate disclosures continues to meet the 'reasonable and supportable information' threshold, including in light of advances that may occur in the quality and accessibility of data, and data-manipulation tools. Entities subject to continuous disclosure obligations should also ensure that, upon the publication of the first report, they are monitoring for materially price-sensitive information that may emerge against the backdrop of their sustainability report. |
ASIC has now clarified that AASB S2 does not permit a reporting entity’s sustainability report to cross-reference information in a report prepared by another entity. To promote transparency and accessibility, ASIC 'strongly encourages' reporting entities to lodge cross-referenced documents with ASIC with their sustainability report, if these cross-referenced documents have not already been lodged with ASIC.
ASIC highlighted that sustainability records should be maintained that support any climate disclosures included in a sustainability report by cross-reference, as that information is taken to form part of the sustainability report. Despite this position, RG 280 also expressly states that the modified liability settings do not extend to statements included in a sustainability report by cross-reference, as the statement is made in another report prepared by the entity.
| Allens' tip: although superficially alluring, reporting entities should consider carefully the implications of incorporating a document by cross-reference. The first consideration is whether the document is even eligible—eg if it was prepared by an offshore parent, it likely means it was not prepared by the reporting entity itself. Even if this hurdle is overcome, further considerations include whether and how the cross-referenced document will be audited, how the reporting entity will carefully delineate which portions of the cross-referenced document constitute statutory disclosures, the scope of the Directors' Declaration required under the regime and whether it will need to extend to some or all of the cross-referenced documents, and whether the cross-referenced material was prepared to the standard of, and verified as, a statutory filing and sustainability records maintained in the same way as the broader sustainability report. |
In RG 280, ASIC acknowledges that many entities currently disclose climate-related financial information together with other sustainability information that is not financially material. These often take the form of annual or biannual standalone 'climate reports' or 'sustainability reports'.
In its draft version of the guide, ASIC emphasised that the sustainability report should be clearly distinguished from other reports historically labelled as ‘sustainability reports’ in Australia (eg other reports containing only voluntary sustainability-related information or that have been provided to investors and stakeholders with the annual report). However, in the final RG 280, ASIC expresses an open mind towards standalone sustainability reports incorporating non-mandatory content (whether related to climate or broader sustainability disclosures), provided the mandatory content is 'clearly identifiable and not obscured by additional information'. ASIC suggests a clear index may assist to identify the location of the climate-related financial information. ASIC also noted it would be helpful if sustainability reports contain a prominent description explaining that the climate-related financial information is required under section 292 of the Corporations Act and AASB S2.
| Allens' tip: many entities are giving thought to how to structure their annual reporting suite, and will be giving consideration to where to house voluntary climate and other sustainability disclosures (if any). As well as heeding ASIC's warning that voluntary content should not obscure, or make it difficult to find, mandatory content, consideration should also be given to practical matters, such as whether the reporting boundaries, basis of preparation disclosures (including inputs and assumptions), definitions and other 'framing' disclosures that are necessary for mandatory content are also suitable for the voluntary content. If not, this may weigh against consolidating that voluntary content with CFRD disclosures. Entities will also need to be carefully consider whether disclosures fall within the scope of the Directors' Declaration required under the regime—indexing may assist in ensuring this is clearly articulated. |
ASIC provides new guidance on the AASB S2 requirements on climate-related scenario analysis, clarifying that reporting entities must use climate-related scenario analysis to assess 'climate resilience' (strategic resilience and operational resilience) using an approach commensurate with the entity’s circumstances.
This new section provides guidance on the intent of required scenario analysis: 'to ensure that users have the benefit of information about the reporting entity’s climate resilience and material financial risks and opportunities relating to climate that are informed by a scenario that:
- contemplates rapid global decarbonisation in the near term (lower global warming scenario); and
- contemplates more pronounced climate impacts over the medium to long term'.
The two mandated climate scenarios are currently an increase in global average temperature well exceeding 2°C above pre-industrial levels (higher global warming scenario); and an increase in global average temperature of 1.5°C above pre-industrial levels (lower global warming scenario). ASIC states there is a risk that reporting entities will not be compliant if they use a climate scenario based on an increase that is less than 2.5°C for the higher global warming scenario.
| Allens' tip: the explanatory material accompanying the bill introducing the CRFD Regime indicated that scenario analysis should involve a scenario of 2.5°C or greater, so we do not expect the clarification on the 2.5°C scenario to come as a surprise to disclosing entities. However, we do feel that ASIC's guidance helpfully supports a view that the scenario analysis for the 2.5°C scenario is likely to be focused on resilience to physical risk, and the 1.5°C scenario analysis is likely to be focused on resilience to transition risk. |
As to reporting entities disclosing their absolute gross scope 3 greenhouse gas (GHG) emissions (including financed emissions) generated during the reporting period, ASIC has confirmed that a reporting entity is permitted to:
- use estimation, rather than solely direct measurement, in measuring its scope 3 GHG emissions; and
- use primary and secondary data, or a combination of both, in measuring the scope 3 emissions of the reporting entity.
ASIC notes the accuracy of estimation techniques may improve over time, as the quality and availability of data for reporting scope 3 GHG emissions (and the cost and effort in obtaining it) improves, and the extent of a reporting entity’s reliance on the use of secondary data (such as industry averages) to measure its scope 3 GHG emissions may evolve over time, as the availability and quality of data (and the likely cost and effort in obtaining it) improves.
| Allens' tip: reporting entities, particularly those with complex businesses, will be aided by determining early how they will get on the 'scope 3 disclosure ladder' when it becomes mandatory in their second year of reporting. The ladder metaphor will also serve as a reminder that, as time goes on, reporting entities will need to ensure they keep up with progress and continuously improve on scope 3 data collection to ensure they are meeting ASIC's expectations. |
Don't take a narrow view of what constitutes 'sustainability records'
Under the CRFD Regime, reporting entities are required to maintain 'sustainability records'. ASIC notes the types of sustainability records a reporting entity is required to keep will depend on the nature of the reporting entity and their broader circumstances.
RG 280 helpfully lists specific examples of what these records might include, such as board minutes, internal reports and analyses, third-party reports, GHG emissions inventories, documentation evidencing climate-related impacts, financial records that support disclosures and records that document matters of fact, inputs, assumptions and matters of judgement. An example might be keeping records of any decision an entity makes as to what 'reasonable and supportable' information is available to it on a particular topic without incurring 'undue cost and effort' and the rationale and information underlying that decision.
As noted earlier, entities are also required to keep sustainability records that support any climate disclosures included in a sustainability report by cross-reference, as that information is taken to form part of the sustainability report.
Importantly, if sustainability records about particular matters are kept outside Australia, sufficient written information about those matters must be kept in Australia to enable the substantive provisions of the sustainability report to be prepared.
| Allens' tip: entities can consider whether they can 'kill several birds with one stone' by setting up document management systems that not only satisfy CRFD record-keeping requirements, but also aid auditors during the assurance process, assist with the verification of material disclosures to mitigate greenwashing and misleading or deceptive conduct-type risk, and support the board in giving a Directors' Declaration over the sustainability report. The process of committing to writing certain assumptions and judgements early on in the report preparation process can also be supportive of good governance more generally. |
Get ready for the continued spotlight on directors' duties
ASIC has provided general guidance for directors of reporting entities in satisfying their duty of care and diligence, including that directors should:
- understand the reporting entity's reporting obligations and material climate-related risks and opportunities;
- require the reporting entity to establish systems that identify, assess and monitor any material climate-related financial risks and opportunities;
- require the reporting entity to establish controls, policies and procedures to oversee, manage and prepare the sustainability report and keep sustainability records—which may include identifying relevant business units and employees responsible for providing key inputs; and
- apply a critical lens to the proposed sustainability disclosures—eg testing and challenging management and questioning the appropriateness and completeness of disclosures and supporting information.
| Allens' tip: although the CRFD Regime is a transparency regime and does not mandate particular climate governance arrangements, the emphasis placed on directors' duties in RG 280 serves as a timely reminder that climate governance arrangements should be fit for purpose. Directors should clearly understand the key judgement calls that underly material climate disclosures and the 'reasonable grounds' upon which those disclosures are made. Whereas large listed entities and RSE licensees in many cases have sophisticated climate governance measures in place, it may be that a number of proprietary companies and responsible entities (who have not previously focused on public climate disclosures) may need to embark on a climate governance uplift in anticipation of extensive disclosures on this topic. |
In addition, although not canvassed in RG 280, directors and, in certain cases, officers, should be aware of other areas of exposure relevant to the new CRFD Regime, including liability provisions under the Corporations Act such as under s344 (eg the obligation to take reasonable steps to secure compliance), s1308 (eg offences regarding lodgement of a sustainability report that is materially false or misleading) and s1309 (eg offences regarding provision of information that is false or misleading where no reasonable steps are taken to ensure the information is not false or misleading). It is a timely reminder for directors and officers of reporting entities to confirm whether they are poised to adequately discharge their responsibilities and duties as their organisations navigate the early years of CRFD reporting.
Consider alignment with sustainability-related financial disclosures outside the sustainability report
To facilitate the disclosure of high-quality sustainability-related financial information outside the sustainability report, ASIC encourages reporting entities to:
- adopt the defined terms in Appendix A of AASB S1 and AASB S2; and
- apply the principles for disclosing useful sustainability-related financial information.
ASIC also encourages non-reporting entities to adopt these defined terms and apply these principles in similar contexts when disclosing sustainability-related financial information as they consider these terms and principles will become widely understood and prevalent.
ASIC clarifies that climate-related disclosures must be included in the OFR only to the extent required to satisfy the requirements in s299A (ie if this is information that shareholders reasonably require to make an informed assessment of the entity’s operations, financial position, business strategies and prospects for future financial years).
| Allens' tip: we encourage all entities covered by the CFRD Regime to prepare a register of legal requirements that interface, or could interact, with their sustainability reports. OFR disclosures, financial statements, investor presentations, market disclosures and PDS disclosures are examples. Those entities can draw on AASB S1 and S2, in line with ASIC's guidance, as appropriate when preparing these other disclosures. We also recommend entities that fall outside the CFRD Regime (eg managers of unregistered schemes) to consider adopting language aligned with AASB S1 and S2 when making climate-related disclosures. |
ASIC foreshadows a 'proportionate and pragmatic approach' to enforcement
RG 280 notes that ASIC will take a proportionate and pragmatic approach to supervision and enforcement as the requirements are being phased in. In particular, in sympathy for entities grappling with challenging new disclosure requirements, ASIC has indicated that if it identifies incorrect, incomplete or misleading statements, it will engage directly with the entity and may provide the reporting entity with the opportunity to make corrective disclosures, or direct that changes be made. Enforcement action is more likely in situations where ASIC detects 'misconduct of a serious or reckless nature' or where an entity fails to prepare a sustainability report for a financial year.
| Allens' tip: while ASIC's language may assist to a degree in quelling internal alarm about the new requirements, reporting entities should be aware that ASIC's CRFD enforcement powers, and the maximum penalties, are on an even footing with its powers over financial reporting. Additionally, ASIC's attitude towards non-compliance will likely evolve after the initial transition period. Accordingly, entities should from day one seek to comply with the same rigour and attention to detail as they currently do with respect to general purpose financial disclosures. |
Is there relief in sight? ASIC provides limited guidance
Concurrently with issuing RG 280, ASIC granted class relief from the sustainability reporting obligations in legislative instruments:
- Stapled entities: the sustainability reporting relief in ASIC Corporations (Reporting by Stapled Entities) Instrument 2023/673 allows the stapled entity to prepare a sustainability report that includes climate-related financial disclosures on behalf of all the members of the stapled group. The relief applies where the sustainability report is prepared as if all the members in the stapled group are a single entity.
- Listed disclosing entities: ASIC Corporations (Electronic Lodgment of Financial and Sustainability Reports) Instrument 2016/181 allows entities listed on ASX, NSX, SIM VSE or SSX to lodge annual reports electronically with the relevant market operator without lodging separate reports with ASIC.
ASIC has provided limited guidance on how it will approach individual relief applications, noting the CRFD Regime is in its early stages and there is a diverse range of circumstances that could arise for reporting entities and other potential applicants. However, RG 280 does provide some colour on two of the three jurisdictional thresholds that would need to be met before ASIC could grant relief:
- Inappropriate in the circumstances: ASIC has noted that this precondition is unlikely to be satisfied merely on the basis that: an entity is privately owned, closely held by only a small number of members or has limited known external users; or users of the climate-related financial information already have access to it. ASIC's view is this precondition will normally only apply where there is an anomaly in the law, or where compliance with the law gives rise to consequences not intended by the legislature.
- Impose an unreasonable burden: ASIC noted that the relevant burden needs to be 'disproportionate to the value of the disclosure for users of the sustainability report'. An applicant operating its business on an ordinary commercial basis (including costs to prepare a sustainability report, obtain expert assistance, obtain an audit and maintain sustainability records) is unlikely to satisfy ASIC that the administrative costs of compliance alone would impose an unreasonable burden.
ASIC highlights that, while its regulatory policy develops over the years, it expects to grant individual relief from the sustainability reporting obligations on a short-term basis, where it is unlikely to exceed one reporting period (ie 12 months). ASIC called out that reporting entities must apply for the relevant relief before the report's lodgement deadline, as relief cannot be granted retrospectively.
| Allens' tip: as ASIC has not provided further clarification on how it will exercise its powers to grant relief and is in its early stages of developing its regulatory approach, we would encourage reporting entities seeking relief to apply as early as possible and (particularly for Group 1 reporters) have a plan in place that addresses the possibility of relief being denied. We consider this prudent given the uncertainty around prospects of relief applications at this stage. We understand ASIC is currently considering how best to, where appropriate, communicate its decision-making in respect of certain themes across relief applications, to provide the market with guidance as to how it is exercising its discretion in this regard. |
In contrast to the negative language summarised above when discussing outright relief ('the precondition is unlikely to be satisfied'), RG 280 uses more inviting language when discussing relief to prepare consolidated reporting: 'an entity may seek individual relief from ASIC to prepare and lodge a consolidated sustainability report'.
The applications for individual relief should address the following factors:1
- the entities that would be included in the consolidated sustainability report if relief was granted.
- why the entities are not entitled to rely on the consolidated group exemption under section 292A(2) of the Corporations Act or any ASIC relief in respect of the relief sought (if relevant).
- the rationale for a consolidated sustainability report.
- how the information in the consolidated sustainability report is proposed to be presented.
- how the relief sought may affect the needs of users of the sustainability report.
Despite the above, in respect of the question as to whether a foreign parent can voluntarily undertake consolidated reporting for the whole corporate group, ASIC has highlighted that the consolidated group exemption under s292A(2) only applies where the parent entity is required to prepare consolidated financial statements—so a foreign parent is unable to voluntarily elect to prepare a sustainability report for a consolidated entity that includes an Australian subsidiary. If the Australian subsidiary is captured as a reporting entity, it must still prepare an individual sustainability report under s292A.
| Allens' tip: as at the date of the RG 280 publication, ASIC has not published information about decisions on significant or novel relief applications. We recommend reporting entities that are considering applying for relief stay informed about any updates from ASIC on artificial consolidation relief applications. We also suggest that entities considering seeking relief weigh up the benefits of consolidation against potential drawbacks, including the misalignment between the boundaries of reporting in financial and sustainability reports. |
Footnotes
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RG 280.192.