Australia’s corporate regulator has delivered its first substantive assessment of mandatory climate reporting, identifying meaningful progress in corporate transparency alongside several areas requiring improvement.

On September 21, 2026, the Australian Securities and Investments Commission (ASIC) published Report 839, reviewing how companies are implementing Australian Sustainability Reporting Standard AASB S2 (Climate-related Disclosures).

The review examined 40 sustainability reports from a population of 312 reports lodged by companies with financial years ending December 31, 2025. It included both listed and unlisted businesses, focusing on industries with significant greenhouse gas emissions or exposure to climate-related risks.

While ASIC acknowledged improvements in reporting quality, its findings send an important message: companies must demonstrate how climate risks translate into financial implications, support their assumptions, and ensure disclosures are consistent with their financial statements.

Early Reporting Shows Progress, but Financial Transparency Remains a Challenge

ASIC found that mandatory reporting has improved the quantity, quality, and consistency of climate-related financial information compared with previous voluntary disclosures. Companies are increasingly integrating climate considerations into governance structures and risk management processes. Within ASIC's sample, 67.5% identified their board as responsible for overseeing climate-related risks and opportunities.

However, the regulator identified significant room for improvement in forward-looking financial disclosures. Notably, 37.5% of reviewed entities provided only qualitative information when describing the current and anticipated financial effects of climate-related risks and opportunities.

ASIC emphasized that companies should consider providing quantitative estimates whenever feasible. Although AASB S2 permits qualitative disclosures in certain circumstances, companies must explain the applicable limitations and provide the supporting information required by the standard. The implication is that broad descriptions of climate exposure may no longer be sufficient without a clear explanation of how those risks could affect financial performance.

Climate and Financial Statements Must Tell a Consistent Story

One of ASIC's central findings concerns the relationship between sustainability reports and traditional financial statements. The regulator identified instances where companies disclosed climate-related costs, investments, or risks in financial statements without clearly connecting that information to their sustainability reports.

Under AASB S2, companies must explain relevant connections between climate-related disclosures and financial information. For example, businesses reporting climate-related capital expenditure, asset impairments, or investments in adaptation measures should consider how these activities are reflected across both reporting documents. ASIC also emphasized the importance of considering historical climate events when identifying future risks.

If a company has previously experienced financial losses from flooding, extreme weather, or supply chain disruptions, those experiences should inform its assessment of future climate-related exposure. These findings reinforce the need for closer coordination between finance, sustainability, and risk management teams.

Scope 3 Emissions and Climate Targets Require Greater Attention

ASIC also highlighted inconsistencies in how companies approach emissions reporting and climate-related targets. Its review found that 82.5% of companies relied on the first-year transitional relief for Scope 3 greenhouse gas emissions reporting.

Scope 3 emissions generally represent indirect emissions across a company's value chain, including suppliers, transportation, and the use of products. While the transitional relief allows companies to omit Scope 3 emissions disclosures during their first year of applying AASB S2, this exemption no longer applies in their second reporting year.

ASIC stressed that companies should prepare for Scope 3 reporting using reasonable and supportable information, recognizing that estimates may be necessary. The regulator also clarified that climate-related targets are not limited to voluntary corporate commitments.

Targets required under legislation, including applicable emissions obligations under Australia's Safeguard Mechanism, must also be considered under AASB S2. For multinational companies, ASIC identified a further concern: disclosures did not always explain how climate targets or governance arrangements established by a global parent applied to the Australian reporting entity.

Disclosure Clarity Is Becoming a Regulatory Priority

Beyond the underlying data, ASIC emphasized the importance of how sustainability information is presented. Companies should clearly explain the assumptions, estimates, and judgments underpinning their disclosures, particularly when assessing financial materiality or conducting climate scenario analysis.

ASIC also identified problematic practices involving disclaimers and cross-references. Companies cannot rely on disclaimers that undermine statutory reporting obligations or suggest they bear no responsibility for the accuracy of disclosures.

Similarly, references to other documents must comply with AASB S2 requirements, including rules concerning the availability and accessibility of the referenced information. The regulator also encouraged companies to distinguish mandatory climate information from additional voluntary disclosures so that material financial information remains clear.

What This Means for Companies Preparing to Report

ASIC's findings are particularly relevant as Australia's climate reporting requirements expand. Under the phased implementation framework:

• Group 1: Reporting applies to financial years beginning on or after January 1, 2025.

• Group 2: Reporting applies to financial years beginning on or after July 1, 2026.

• Group 3: Reporting applies to financial years beginning on or after July 1, 2027.

Applicability depends on statutory eligibility criteria, including financial reporting obligations and relevant company-size, emissions, or asset thresholds. For businesses preparing their first reports, ASIC's observations provide a practical roadmap.

Companies should prioritize reviewing climate-related risks against historical financial information, documenting significant reporting assumptions, preparing for applicable Scope 3 emissions requirements, and ensuring climate disclosures are consistent with financial statements.

Multinational organizations should also assess whether Australian subsidiaries can adequately explain the application of group-level governance structures, targets, and risk management procedures. Importantly, Report 839 does not introduce new reporting requirements. Instead, it provides regulatory feedback on the implementation of existing obligations and offers clearer guidance on the practices ASIC expects companies to improve.

Looking Ahead: From Initial Compliance to Reporting Quality

ASIC has confirmed that it will continue reviewing sustainability disclosures, including reports from Group 1 entities with financial years ending June 30, 2026. The regulator is also engaging with the Australian Treasury on proposed reforms intended to reduce reporting complexity while preserving core disclosure obligations.

For companies, the broader message is clear. Australia's climate reporting framework is moving beyond its initial implementation phase, with increasing attention on the reliability, transparency, and financial relevance of corporate disclosures. Businesses that establish stronger connections between financial reporting, climate risk assessment, emissions data, and internal governance will be better positioned as regulatory scrutiny continues.