June 2025 ESG Policy Update—Australia

Australian Update

ASIC Includes Climate-Related Disclosures in its Financial Reporting and Audit Focus Areas for FY2025-26

The Australian Securities and Investments Commission (ASIC) has published its financial reporting and audit focus areas for the 2025-26 financial year. These include an emphasis on the surveillance of sustainability reporting standards.

This is designed to assess implementation of the Australian Accounting Standards Board (AASB) S2 Climate-related disclosures (AASB S2), which became mandatory for Group 1 entities with financial years commencing on or after 1 January 2025. Further information on the criteria for a Group 1 entity can be found here.

This reporting standard is applicable for entities who:

• Are required to prepare an annual financial report under Chapter 2M of the Corporations Act 2001 (Cth);
• Meet certain sustainability reporting thresholds; and
• Have not obtained sustainability reporting relief from ASIC.

However, ASIC has indicated that their approach to supervising and enforcing this reporting standard will be proportionate and pragmatic to align with the phased-in approach.

With the new financial year in Australia having commenced on 1 July 2025, entities should consider Regulatory Guide 280 (RG 280) which provides practical guidance about complying with sustainability reporting obligations.

ASIC Commissioner Delivers Keynote Address Clarifying the New Mandatory Climate-Related Reporting Framework

On 29 May 2025, the Commissioner of ASIC, Kate O'Rourke, delivered a keynote address at the Responsible Investment Association Australasia (RIAA) Conference in Sydney.

The address noted that ASIC:

• Is working to help entities comply with the new mandatory climate-related reporting framework; and
• Intends to develop a set of educational materials to help report preparers understand the concepts underlying the reporting obligations.

Additionally, ASIC is beginning to receive applications for relief from sustainability reporting and audit obligations. The majority of these relief applications relate to novel issues which are highly specific to the applying entity.

Also, ASIC is encouraging entities considering relief to apply as early as possible.

This is because many of the issues being raised have not previously been considered and will take time to evaluate.

Finally, an important distinction was made between its treatment of sustainability reporting and that of greenwashing. ASIC explained that provisions in relation to misleading and deceptive conduct are "long-standing provisions" under the Corporations Act, with very well-established legal principles whilst the sustainability reporting regime is "new" and ASIC's focus in relation to sustainability regime is on "helping reporting entities to comply".

Australia Launches Sustainable Finance Taxonomy to Support Carbon Neutral Strategy

On 17 June 2025, the Australian Sustainable Finance Institute (ASFI) announced the launch of its first sustainable finance taxonomy. This voluntary framework aims to guide investments towards net zero goals, aligning with the Paris Agreement.

The taxonomy categorises economic activities into green and transition-focused sectors, aiming to enhance transparency and facilitate capital flows. It covers key areas such as agriculture, mining, manufacturing, and transport, and is the first globally to include high-emission sectors like minerals and metals.

This initiative is part of Australia's Sustainable Finance Roadmap, designed to mobilise private capital for a net zero economy. The taxonomy will be piloted by major financial institutions within Australia to explore diverse use cases and refine the tool for broader market adoption.

The sustainable finance standards body Climate Bonds Initiative will expand its Certification Scheme to align with the taxonomy, promoting harmonisation.

Australia's launch of this taxonomy positions it alongside global leaders like the EU and UK, marking a potentially transformative moment for its sustainable finance market.

Australia to Consider Carbon Border Tariffs in International Trade

On 1 June 2025, Energy Minister Chris Bowen indicated that Australia is considering a Carbon Border Adjustment Mechanism (CBAM) on imports like cement and steel, aligning with recommendations from the Climate Energy Finance (CEF) report (Report). This Report emphasises the urgent need for carbon border tariffs to address the carbon emissions embedded in industrial commodities, which account for 15% of global emissions.

The Report outlines four pillars essential for effective international carbon pricing: high domestic carbon pricing, CBAMs to level the trade playing field, complementary industrial policies, and collaboration with key trading partners. Australia, with its abundant renewable resources and status as a major exporter of iron ore and gas, is well-positioned to advocate for an Asian CBAM.

The Report suggests that an Asian CBAM could drive the development of a green commodities industry in Australia, potentially delivering a multi-hundred-billion-dollar economic boost. It also highlights the strategic importance of Australia transitioning from fossil fuels to clean commodities like green iron, which could enhance its economic resilience and energy security.

The CEF's analysis has been supported by various stakeholders, including the Smart Energy Council, which views the move towards an Asian CBAM as a strategic alignment of decarbonisation efforts with trade competitiveness.

View From Abroad

EPP's Draft Amendments to "Omnibus" Initiative Proposes Changes to Sustainability Reporting Regulations

On 12 June 2025, the European People’s Party (EPP) published its proposals to amend the European Commission’s "Omnibus" initiative.

The "Omnibus" initiative aims to simplify various sustainability reporting requirements and due diligence regulations, particularly within the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). 

Key changes proposed by the EPP to amend the "Omnibus" include:

• The EPP draft proposes to further limit the scope of the CSRD and CSDDD to companies with more than 3,000 employees and €450 million in revenue, compared to the Commission's proposal of a 1,000 employee threshold;
• The draft retains voluntary standards for a limit for smaller companies but raises the threshold to 3,000 employees. It allows companies to comply with sustainability reporting obligations by explaining how and if the disclosure information is unavailable; and
• The draft removes the requirement for climate transition plans, making it optional for companies to report on them if they exist and eliminates the provision for member states to impose stricter sustainability due diligence requirements.

The proposed amendments highlight the lack of consensus in the European Parliament, with opinions ranging from protecting the CSRD and CSDDD to opposing the proposed amendments and to eliminating the CSRD and CSDDD altogether.

EPA Proposes to Roll Back Greenhouse Gas Emissions and Mercury Emissions Rules for Power Plants

On 11 June 2025, the U.S. Environmental Protection Agency (EPA) announced a proposal to repeal key regulations on greenhouse gas (GHG) and mercury emissions from fossil fuel power plants. This move aims to reverse the stricter standards set by previous administrations, with the EPA stating the repeal would potentially save the power sector US$1.2 billion annually, or US$19 billion over two decades.

The EPA argues that emissions from U.S. fossil fuel-fired power plants do not significantly contribute to global GHG levels, suggesting that policies such as the Clean Air Act 1961 should determine what is considered a "significant" contribution based on the impacts and effects of statutory policy considerations, rather than a quantitative measure of emission volumes. This proposal includes rolling back the 2024 amendments to the Mercury and Air Toxics Standards (MATS), which had imposed tighter limits on mercury and particulate matter emissions.

The EPA's decision to ease regulations is part of a broader effort to support the fossil fuel sector, challenging the previous administration's push towards clean energy. The agency will hold a public hearing and open a comment period for these proposals, inviting feedback from stakeholders.

The authors would like to thank graduates Aibelle Espino and Isaac Gilmore for their contributions to this alert.