ASIC finalises its guidance RG 280 for climate-related financial disclosures, while reminding small businesses how they can prepare for the regime

April 7, 2025

Key highlights from ASIC's released guidance are:

• Three types of reporting entities
• Obligations to keep sustainability records
• Directors' duties and climate reporting
• Directors' declarations
• Modified liability regime
• Climate related scenario analysis
• Scope 3 emissions
• Sustainability related financial disclosures outside the sustainability report
• ASIC's approach in the early years of enforcement

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If you need help on the application of the mandatory climate-related financial disclosure requirements in Australia as applicable to your organisation and entities or assistance with developing your sustainability-related/ climate-related data due diligence, verification and disclosure processes within an appropriate and tailored governance, compliance and risk management frameworks, please get in touch with our experienced climate and sustainability advisory team.

'The objective of sustainability reporting is to improve the quality, consistency and comparability of climate-related financial disclosures to enable users of that information to make informed decisions' (ASIC RG 280, page 4)

On 31 March 2025, as scheduled, ASIC released its final guidance, ASIC Regulatory Guide RG 280 Sustainability reporting together with Report 809 in response to submissions on its Consultation Paper 380.

On the same day, ASIC issued a media release 'What small businesses need to know about sustainability reporting requirements | ASIC' to educate small businesses about their role in the new mandatory climate reporting requirements, stating:

'Many small businesses form part of the value chain of larger businesses, which means they may need to engage with climate reporting considerations over time, even if they do not have any direct climate reporting obligations.'

ASIC's guidance in RG 280 follows the following format and content:

Section	Heading	What is covered?
A	Overview	Sustainability reporting objectives and ASIC's role
B	Preparing the sustainability report	1. Who is a reporting entity? (including guidance on consolidated entities and group members of stapled groups) 2. Sustainability reporting thresholds 3. Obligations to keep sustainability records 4. Directors' duties and the modified liability window
C	Content required in a sustainability report	1. Overview of required content 2. Statements of no material financial risks or opportunities related to climate 3. Statements of forward-looking climate information 4. Cross-referencing 5. Labelling 6. Climate-related scenario analysis 7. Scope 3 greenhouse emissions 8. Proportionality mechanisms and exceptions under AASB S2
D	Sustainability-related financial disclosures outside the sustainability report	1. Overview of sustainability-related financial information 2. Sustainability-related financial information in the OFR 3. Sustainability-related financial information in disclosure documents under Chapter 6D 4. Sustainability-related information in PDSs
E	ASIC's administration	1. ASIC's approach to supervision and enforcement during early years of reporting 2. ASIC's approach and powers to grant reporting and audit relief 3. How to apply for relief 4. ASIC's review of sustainability reports

'[ASIC's] focus is ensuring users are provided with high-quality, decision useful, climate-related financial disclosures that comply with the Corporations Act and AASB S2 Climate-related disclosures (AASBS2)' (ASIC RG 280, page 4)

Some of the key highlights from ASIC's released guidance are:

1. Reporting entities

1.1 ASIC summarises that there are three types of reporting entities - being entities required to report under Chapter 2M of the Corporations Act and:

1. those that meet the corporate size threshold - that is, the entity (and the entities it controls if any) meets two of the three corporate size thresholds for consolidated revenue, value of consolidated assets or the number of employees under s292A(3);

2. those that meet the emissions threshold - the entity is a registered corporation that has emissions reporting obligations under the NGER Act (see s292A(5));

3. the value of assets threshold - the entity is a registered scheme, RSE or retail CCIV and it (and the entities it controls if any) meets the criteria for the value of assets, being that the value of assets at the end of the financial year is equal to or greater than AU$5 billion.

1.2 A refresher on the thresholds and phasing approach for Group 1, 2 and 3 entities is set out in the table below. It is important to note that a registered scheme, RSE or retail CCIV may meet the value of assets threshold (and not the corporate size threshold or emissions threshold) for Group 2 but also conversely, a registered scheme, RSE or retail CCIV may meet the corporate size threshold or emissions threshold for Group 2 or Group 3 independently (and not meet the value of assets threshold).

Group	Corporate Size Threshold	Emissions Threshold	Value Threshold
Group 1 For annual reporting periods commencing on or from 1 January 2025 to 30 June 2026	Entities meeting at least 2 of: 1. consolidated revenue ≥ AU $500 million 2. value of consolidated value of gross assets ≥ AU$1 billion 3. 500 or more employees (excluding registered schemes, RSEs and retail CCIVs)	Entities that: 1. are registered corporations under the NGER act or are required to make an application to be registered under s12 (1) of the NGER Act; and 2. are a member of a group (as defined in section 8 of the NGER Act) that meets, for a financial year, the threshold in s13(1)(a) of the NGER Act (excluding registered schemes, RSEs and retail CCIVs)	N/A
Group 2 For annual reporting periods commencing from 1 July 2026 to 30 June 2027	Entities meeting at least 2 of: 1. consolidated revenue ≥ AU$200 million 2. value of consolidated value of gross assets ≥ AU$500 million 3. 250 or more employees	Entities that are registered corporations under the NGER act or are required to make an application to be registered under s12 (1) of the NGER Act.	Registered schemes, RSEs and retail CCIVs where the value of assets at the end of the financial year of the entity (and the entities it controls) ≥ AU$5 billion
Group 3 For annual reporting periods commencing 1 July 2027 to 30 June 2028	Entities meeting at least 2 of: 1. consolidated revenue ≥ $50m 2. value of consolidated value of gross assets ≥ $25m 3. 100 or more employees	N/A	N/A

1.3 In applying the thresholds, ASIC's guidance confirms that:

• the concepts of 'revenue', 'assets' and 'employees' have the same meanings as the equivalent concepts in s45A(3) of the Corporations Act (which are determinative of whether a company is a large proprietary company) (RG 280.43);

• the value of assets threshold applies exclusively to registered schemes, RSEs and retail CCIVs, and in respect to a retail CCIV, to the whole retail CCIV;

• the thresholds are to apply to an entity and all entities which the entity controls - in determining whether an entity controls another under s292A(3) of s292A(6), AASB Consolidated Financial Statements (AASB 10) should be considered (being the accounting standards which determine this matter) (RG 280.42);

• a subsidiary company that is part of a consolidated entity need not prepare a sustainability report, where the parent entity elects to prepare a sustainability report for the consolidated entity for the financial year and is also required by the accounting standards to prepare financial statements for the consolidated entity for the financial year (see s292A(2)) (RG 280.44); and

• a stapled entity in a stapled group need not prepare a sustainability report, where one of the stapled entities for the group prepares a sustainability report on behalf of the group relying on ASIC Corporations (Reporting by Stapled Entities) Instrument 2023/673 (RG 280.44).

2. Obligations to keep sustainability records

2.1 ASIC provides guidance by giving examples of the types of records which may constitute 'sustainability records' having regards to its broad definition under section 9 of the Corporations Act (RG 280.51). It is recommended that reporting entities consider these examples and update their internal policies as to the types of sustainability records they will maintain for their record retention obligations.

2.2 Entities that are required to prepare a sustainability report for a financial year must keep sustainability records for seven years after the sustainability report to which they relate was completed, and failure to keep sustainability records is a strict liability offence (RG 280.49).

3. Directors' duties

3.1 At RG 280.55, ASIC provides guidance as to the things directors should do to meet their duty of care and diligence with respect to the reporting entity's obligations to prepare a sustainability report (including as applicable to directors of entities required to prepare a sustainability report on behalf of a registered scheme, RSE or retail CCIV). ASIC references Information Sheet 183 as providing helpful principles, including that directors should apply an inquiring mind to the information proposed in the sustainability report.

3.2 In addition to the matters which ASIC states directors should do in RG 280.55, ASIC also states that directors of APRA-regulated entities should refer to CPG 229 Climate change financial risks.

3.3 Directors should take note of ASIC's guidance and reporting entities should ensure that their directors are well educated on their expected requirements, including that directors should:

• have an understanding about the reporting entity's sustainability reporting obligations

• have an understanding about climate-related risks (including physical risks and transition risks) or opportunities that could reasonably be expected to affect the reporting entity's prospects, including its access to cash flows, its access to finance and cost of capital over the short, medium and long term: paragraph 2 of AASB S2;

• require the establishment of systems that identify, assess and monitor any material financial risks and opportunities (and changes);

• require the establishing of controls, policies and procedures for overseeing, managing and preparing the sustainability report;

• require the establishing of controls, policies and procedures for keeping sustainability records;

• apply a critical lens to the disclosures proposed in the sustainability report, such as questioning the appropriateness or completeness of methodologies, inputs and assumptions used to support disclosures, the extent that there may be any material omissions having regard to their knowledge of the reporting entity's business, whether the disclosures have been properly characterised and whether additional information should be disclosed.

3.4 ASIC states that while directors may rely on special knowledge and expertise of relevant experts, directors still need to 'make an independent assessment of the information and advice provided, using their own skills and judgment, and rely on such information or advice available at the time in good faith' (RG 280.56).

4. Directors' declarations

4.1 ASIC's guidance confirms the scope of the directors' declaration required for sustainability reports prior to financial years commencing before 1 January 2028 will be modified as follows: in this period, directors will be required to declare that, in their opinion, the entity has taken reasonable steps to ensure that the sustainability report (other than the directors' declaration) is in accordance with the Corporations Act and AASB S2.

4.2 For financial years commencing on or after 1 January 2028, directors of reporting entities will be required to declare whether, in the directors' opinion, the sustainability report (other than the directors' declaration) is in accordance with the Corporations Act and AASB 2.

4.3 This will require entities to identify in their policies and procedures for the preparation of a sustainability report what they consider 'reasonable steps' involves in the context of the directors providing the declaration in the first few years of the regime. ASIC does not provide any guidance, however, as to what 'reasonable steps' requires.

4.4 Reporting entities would be well advised to start with a 'reasonable steps' approach to undertaking due diligence processes and verification of the information in the sustainability report and a checklist approach to the requirements of AASB S2 (and the Appendices) in a similar way which is applied to information disclosed in a prospectus or PDS, with relevant modifications for the prescriptive requirements in AASB S2 (and the Appendices) for the disclosure of climate-related information.

5. Modified liability regime

5.1 ASIC has clarified its guidance on the application of the modified liability regime for protected statements. A refresher on the types of protected statements and their modified liability periods is in the table below:

Protected statement	Location and purpose of statement**	Modified liability period
A statement relating to climate, and at the time it is made, is about the future	Statement is made in: • the sustainability report for the purposes of complying with a sustainability standard; or • the auditor's report for the purpose of complying with the Corporations Act or the auditing standard	Report prepared for financial years commencing between 1 January 2025 and 31 December 2025
A statement made about: • scope 3 greenhouse emissions • scenario analysis • a transition plan	Statement is made in: • the sustainability report for the purposes of complying with a sustainability standard; or • the auditor's report for the purpose of complying with the Corporations Act or the auditing standards	Report prepared for financial years commencing between 1 January 2025 and 31 December 2027

5.2 Under the modified liability regime, no legal action other than criminal action or action by ASIC can be brought against a person in relation to protected statements made in the relevant modified liability period.

5.3 It is important for reporting entities to be aware however that (see RG 280.67 to RG 280.69):

• statements in a sustainability report are only protected statements if they are made for the purpose of complying with a sustainability standard - the modified liability regime will not apply to voluntary sustainability-related disclosures; and
• **protected statements outside a sustainability report will be protected but only when:
  • the statement is required to be made under a Commonwealth law; and
  • the statement is the same as the protected statement, or differs from a protected statement only in so far as it contains updates or corrections (see s1707D(1)(b));
• protected statements made voluntarily outside of a sustainability report and not required under a Commonwealth law will not benefit from the modified liability settings; and
• statements included by cross reference in the sustainability report will not be protected;
• statements which summarise a protected statement or expand on the content of a protected statement will not be protected; and
• statements which comprise updates or corrections to a protected statement will not be protected unless they are required to be made under a Commonwealth law.

5.4 Examples of when protected statements may be required to be made under a Commonwealth law include:

(a) a protected statement that is required to be disclosed in compliance with continuous disclosure obligations under s674 and s675;

(b) a protected statement that is required to be included in the OFR under s299A(1);

(c) a protected statement that is required to be included in a disclosure document under s710;

(d) a protected statement that is required to be included in a PDS, such as under s1013D or s1013E; and

(e) a protected statement that is required to be updated or corrected under a direction given by ASIC under s 296E(1).

5.5 Reporting entities which are developing their policies around the use of protected statements in the early years of the regime should ensure that they have strict rules and protocols about the:

(i) creation of protected statements;

(ii) identification, use and location of protected statements;

(iii) updating of protected statements; and

(iv) disclosure of protected statements, to ensure that the modified liability settings apply.

5.6 Reporting entities should also have controls and procedures for the identification of non-protected statements and appropriate governance, review and decision-making processes for determining whether and where to disclose non-protected statements.

6. Forward-looking information in climate statements

6.1 As stated above, notwithstanding the modified liability regime, reporting entities may still be subject to ASIC prosecution for forward-looking climate statements which would otherwise be protected statements.

6.2 In its guidance about forward-looking climate-related statements, ASIC states that reference to RG 170 about prospective information is helpful but is not adequate in determining a reporting entity's required approach to making statements about forward-looking climate-related information.

6.3 At RG 280.83 ASIC reminds reporting entities that forward-looking information in climate statements must comply with Appendix D of AASB 2, which provides both the fundamental and enhancing qualitative characteristics of useful climate-related financial information, being:

a) relevance and faithful representations (fundamental characteristics at D4-D15); and

b) comparability, verifiability, timeliness and understandability (enhancing characteristics at D16 to D33).

6.4 It follows that reporting entities must maintain adequate sustainability records that explain the methods, assumptions and evidence for all forward-looking information in the climate statements, and as to how those statements meet the requirements of Appendix D of AASB S2.

7. Labelling a 'sustainability report'

7.1 ASIC provides guidance that reporting entities may prepare a standalone report which only contains the climate-related financial information required under the Corporations Act and AASB S2 with a prominent description explaining that the climate-related financial information is required under s292A of the Corporations Act and AASB S2 (RG 280.93). While ASIC accepts that a reporting entity may include broader sustainability-related information in its sustainability report, the 'climate-related financial information should be clearly identified and not obscured.'

7.2 Reporting entities may wish to heed ASIC's guidance, particularly having regards to the fact the modified liability regime (see paragraph 5 above) will not apply to voluntarily provided information that is disclosed but not required by a sustainability standard.

8. Climate-related scenario analysis

8.1 In RG 280.99, ASIC provides guidance that for the second mandated climate scenario - at the higher global warming scenario using an increase in global average temperature well exceeding 2 degrees Celsius above pre-industrial levels (see s296D(2B)(a) of the Corporations Act and s3(a)(ii) of the Climate Change Act) - this climate scenario analysis should be based on an increase of 2.5 degrees Celsius or higher.

8.2 Accordingly, reporting entities should be developing their climate-related scenario analysis models on:

1. the mandated lower global warming scenario analysis of 1.5 degrees; and

2. a higher global warming scenario analysis of 2.5 degrees of higher.

9. Scope 3 emissions

9.1 At RG 280.102 to RG 280.107, ASIC summarises the requirements for reporting entities' disclosure obligations with respect to scope 3 greenhouse emissions under AASB S2. In accordance with AASB S2, reporting entities are permitted to use primary and/or secondary data, and a combination of both, in measuring scope 3 emissions.

9.2 ASIC has left its guidance open for reporting entities to determine how they will meet their obligations 'to use all reasonable and supportable information that is available to the entity at the reporting date without undue cost or effort when the entity selects the measurement approach, inputs and assumptions it uses in measuring scope 3 greenhouse gas emissions'. Further, ASIC has not given any examples or explanation of what 'without undue cost or effort' means and how this requirement should or could operationally be implemented.

9.3 It is accepted by ASIC (see RG 280.106) that the accuracy of estimation techniques and the quality and availability of data will evolve and improve over time, leaving it for reporting entities to establish their own systems, procedures and controls for using and disclosing primary and secondary data. In this respect, reporting entities should ensure their use of data and disclosures comply with the principles in D4-D33 in Appendix D of AASB S2, and specifically apply the principle in paragraph D15(c) of appendix D of AASB S2 that 'estimates, approximations and forecasts should be clearly identified as such'. (see also RG 280.114).

10. Sustainability-related financial disclosures outside the sustainability report

10.1 ASIC's guidance reminds reporting entities that their disclosure obligations with respect to the preparation of a sustainability report under the Corporations Act are separate to their disclosure obligations with respect to sustainability-related financial information, where applicable:

• in the OFR (for listed entities);

• in a disclosure document under Chapter 6D (e.g. a s710 prospectus); or

• in a PDS (prepared under Part 7.9).

10.2 While ASIC does not give guidance as to how organisations should meet their reporting obligations under these specific regulatory requirements, ASIC gives guidance that entities are encouraged to:

1. adopt the definitions for terms in Appendix A of AASB S1 and AASB S2, if those terms are used in disclosure outside the sustainability report; and

2. apply the principles for disclosing useful sustainability-related financial information at paragraphs D4-D33 of Appendix D of AASB S1 and AASB S2, when disclosing sustainability-related financial information outside the sustainability report.

10.3 ASIC also encourages this of non-reporting entities (see RG 280.115), as the defined terms and principles are expected to become widely understood and prevalent, when disclosing sustainability-related financial information.

10.4 Having regards to this ASIC guidance, reporting and non-reporting entities should be updating their disclosure policies (and due diligence and verification processes) for preparation of sustainability-related financial information in the context of an OFR, prospectus and PDS (as applicable) to be aligned with and consistent with the definitions in Appendix A and the principles in D4-D33 in Appendix D of AASB S1 and AASB S2.

11. Applications for relief

11.1 ASIC has previously issued two specific ASIC instruments for relief from the sustainability reporting requirements ASIC Corporations (Financial Reporting by Stapled Entities) Instrument 2023/673 and ASIC Corporations (Electronic Lodgment of Financial Reports) Instrument 2016/181.

11.2 In RG 280 (at RG 280.156 to 280.199), ASIC provides its guidance to entities who may consider seeking relief from the regime, including as to how it will consider individual applications for relief on a case-by-case basis and the basis upon which it may grant relief, being either where:

• Compliance would make the sustainability report or other reports misleading;

• Compliance would be inappropriate in the circumstances - noting this jurisdictional threshold will generally only be satisfied if there is an anomaly in the law, or when compliance with the law gives rise to consequences not intended by the legislature;

• Compliance would impose an unreasonable burden - that is, an applicant must be able to demonstrate that the burden is disproportionate to the value of disclosures for users of the sustainability report.

11.3 ASIC gives limited guidance as to the types of relief which may be sought indicating that relief may be available for:

1. seeking an extension of time for lodging a sustainability report;

2. seeking relief to lodge a consolidated sustainability report for a group of reporting entities, where there is not a requirement for consolidated financial reporting;

3. audit relief.

12. ASIC's approach in the early years of enforcement

12.1 Finally, ASIC promotes in RG 280 that it will be taking a proportionate and pragmatic approach to supervision and enforcement of the mandatory climate-related financial disclosure requirements as these requirements are phased in. However, what does this mean?

12.2 ASIC indicates (see RG 280.154 and 155) this means that:

• where it identifies that a statement in a sustainability report is incorrect, incomplete or misleading in any way, ASIC will engage directly with reporting entities to understand the basis for the relevant disclosures;

• if concerns remain after such engagement, ASIC may provide entities with the opportunity to make changes or otherwise direct changes using its directions power (see s296E); and

• ASIC is more likely to commence an enforcement investigation where ASIC sees misconduct of a serious or reckless nature, or where a reporting entity fails to prepare a sustainability report for the financial year.

12.3 How ASIC's approach on enforcing mandatory climate-related financial disclosures will interact with its policy and enforcement approach on greenwashing, however, is not entirely clear. ASIC has previously announced that combatting greenwashing risk is a key priority and 'critical to maintaining trust in sustainable finance-related products and services.' (see ASIC Information Sheet 271 and Report 791). Reporting entities should be aware of ASIC's strict stance and prosecutorial approach on greenwashing risk with respect to misleading and deceptive statements and notwithstanding of ASIC's statements about being 'proportionate and pragmatic', it is strongly recommended that reporting entities have robust processes and controls to mitigate any risk with respect to misleading and deceptive statements in a sustainability report (or outside a sustainability report).

How Dentons can help?

If you need help on the application of the mandatory climate-related financial disclosure requirements in Australia as applicable to your organisation and entities or for assist with developing your sustainability-related/ climate-related data due diligence, verification and disclosure processes within an appropriate and tailored governance, compliance and risk management frameworks, Dentons can help.

We have developed an AASB S2 compliance checklist of the key requirements, Appendix A definitions and Appendix D principles to assist our clients to become educated about the requirements and implement these requirements, definitions and principles in their sustainability-related financial disclosure policies, systems and procedures.

If you have any questions about the new mandatory climate-related financial disclosure regime, please reach out to our key contacts, Michelle Segaert or Vanessa Gore.