1 in 4 group 1 entities had no climate transition plan: Mallesons

There has been a consensus in the format and nature of mandatory sustainability reports for group 1 entities in the first wave of reporting, says Emma Newnham, special counsel at Mallesons.

In its April report, Mandatory Sustainability Reporting in Practice, Mallesons found that many of the reports were broadly aligned on governance and risk identification, with divergence where companies needed to exercise judgement. The firm’s research is based on a review of mandatory sustainability reports by 23 group 1 reporting entities published on the ASX on or before 3 March 2026, with a 31 December 2025 year-end.

The report found that on average, these entities disclosed three material climate-related risks and one material climate-related opportunity. In addition, it revealed that nearly one in two of the entities did not explain how they identified the material risks.

Further, 83 per cent of entities provided a mixture of qualitative and quantitative disclosures on the impacts of material climate-related risks and opportunities on their financial position, performance and cash flows. The financial effects of material risks and opportunities, such as risk-by-risk and opportunity-by-opportunity, were disclosed on an individual basis by 87 per cent of entities, with 13 per cent who disclosed them cumulatively.

It also found that nearly nine in 10 (87 per cent) of these entities included climate reporting in their annual report, with the remainder preparing a separate sustainability report and lodging it with their annual report.

In their reports, 26 per cent said they included a climate transition plan compared to 35 per cent who published their plan separately and 39 per cent with no climate transition plan. Further, 78 per cent included a basis of preparation and methodology within their reports.

Mallesons urged that directors are ultimately responsible for their company’s sustainability reporting, even with temporary liability protections in place.

“Practically, this means that climate literacy is vital - as are clear information flows and confidence in the systems, controls and assurance supporting approval of the report and the directors’ declaration,” the firm said.

“Sustainability reporting is no longer sitting at the edge of governance. Directors and their teams are now expected to actively understand how material climate risks and opportunities affect strategy, cash flows and access to capital - and be satisfied that their company’s disclosures genuinely hold together,” Newnham added.

Mallesons’ research showed that 65 per cent of the 23 entities offered their directors climate-specific education or training through targeted briefings, workshops or external short courses, and 61 per cent linked executive remuneration to climate or sustainability outcomes.

Fifty-two per cent of boards or board committees reported receiving ESG-related updates quarterly, commonly through board committee reporting, with 17 per cent receiving biannual updates, and 83 per cent, including a dedicated climate, ESG or sustainability metric in their board skills matrices.

Malleson noted that the regime has implications for what and how companies choose to disclose overall.

“Many companies have reported on sustainability for years, well before it became mandatory, and many continue to include voluntary disclosures,” Newnham said.

“ASIC has warned that voluntary disclosures are often repetitive, obscure, lacking detail and unlinked to targets, actions and strategy, although it has acknowledged they may be necessary to meet the needs of users and can be disclosed within mandatory sustainability reports.”

“How voluntary information is framed can have important implications for the application of modified liability settings, as well as directors’ declarations.”