ASIC review reveals increased quality in sustainability reporting

Following the introduction of statutory sustainability reporting requirements, ASIC’s latest report into sustainability reporting has revealed improvements to the quality, quantity, and consistency of climate-related financial information.

In its September report, Report 839, ASIC’s review of sustainability reports lodged for 31 December 2025, the corporate regulator found that entities showed evidence of adapting or updating existing governance and risk management processes; however, it recommended that these entities continue to ensure they expand upon the early observations on sustainability reporting published in May.

The report reviewed a sample of 40 sustainability reports, 13 per cent of the 312 sustainability reports lodged by reporting entities with a 31 December 2025 year-end.

The report found that entities complied with the basic requirements of the Corporations Act for sustainability report lodgment and engaged in good faith with the disclosure requirements under the Australian Sustainability Reporting Standard (AASB S2).

“We saw examples of entities adapting or updating existing governance and risk management processes,” the report read.

Of the 40 entities, 95 per cent identified at least one climate-related risk or opportunity that could reasonably be expected to affect the entity’s prospects over the short, medium or long term, with only two not identifying any climate-related risks or opportunities.

Further, 67.5 per cent said that their board was responsible for overseeing climate-related risks and opportunities, and 42.5 per cent of these entities incorporated climate-related factors into executive remuneration in some way.

“This shows that climate-related risks and opportunities are being considered by directors as part of their core oversight function… [and suggests] the delivery of certain climate-related action is being incentivised,” the report read.

Interestingly, 37.5 per cent of these entities provided qualitative, narrative-form information on the anticipated financial effects of climate-related risks and opportunities, compared with 57.5 per cent who relied on measurement uncertainty.

Also, 20 per cent of the entities said that they limited their analysis to qualitative, narrative-form scenarios.

While this form of analysis is allowed under AASB S2, it must be commensurate with the entity’s circumstances.

In addition, 65 per cent of these entities aligned the time horizon for climate resilience disclosure with the time horizons applied for identifying climate-related risks and opportunities, 47.5 per cent disclosed information about their climate-related transition plans in their sustainability reports, and 82.5 per cent relied on the one-year transitional relief for Scope 3 greenhouse gas emissions disclosure provided under AASB S2.

Overall, the commission found opportunities to improve “forward-looking disclosures and those underpinned by assumption or judgement, for example in aspects of strategy and metrics and targets disclosures”, and is currently engaging with Treasury on reforms to improve the efficiency of disclosures.

“We are supportive of measures that reduce regulatory burden whilst preserving core sustainability reporting requirements and will continue to engage with Treasury on these proposed reforms,” said Kate O’Rourke, ASIC commissioner.

“The findings in this report are designed to provide reporting entities with timely and accessible feedback on what we have observed to reduce regulatory uncertainty while also improving the quality of climate-related information for users,” O’Rourke said.

“It appears that statutory reporting has not only resulted in heightened transparency, but also more meaningful engagement by entities with climate-related risks and opportunities.”

The compulsory sustainability reporting requirements commenced in 2025 to improve the quality, consistency and comparability of climate-related financial disclosures, enabling users to make informed decisions.

Since its early observations published in May, entities with financial years ending 31 December 2025 have lodged an additional 53 sustainability reports, bringing the total for this cohort to 312.

ASIC will continue its reporting by reviewing sustainability reports lodged by Group 1 entities with financial years ending 30 June 2026 in the 2026–27 financial year.

O’Rourke said: “We expect improvements over time as more information becomes available and as entities gain more experience.”