ISSB Reporting Feedback for US-based Multinationals – Australian Regulator Issues Initial Observations on First Reports

The Australian Securities and Investments Commission has published its initial observations on the first mandatory sustainability reports prepared pursuant to Australia’s AASB S2 climate-related disclosures standard. AASB S2 is based on the IFRS S2 climate standard issued by the International Sustainability Standards Board. In addition to its relevance for Australian compliance by US-based multinationals, as a first-mover ISSB-aligned jurisdiction, Australian regulatory guidance and market practice can be expected to inform approaches in other aligned jurisdictions. The ASIC observations, and recently announced potential changes to Australian mandatory sustainability reporting, are discussed in this post.           

This is the first year of reporting under AASB S2, which is being phased in over three years. Group 1 companies are required to prepare sustainability reports for financial years starting on or after January 1, 2025.

ASIC is Australia's integrated corporate, markets, financial services and consumer credit regulator. It has published its initial AASB S2 observations to assist entities and advisors as they prepare upcoming Group 1 sustainability reports.

According to ASIC, 259 reports were submitted as of May 6 by entities with a December 31, 2025 financial year-end. Of these, 225 were submitted by unlisted companies, while listed companies comprised the remainder. Most of the reports were from the following five sectors: (1) mining-related; (2) construction, materials and manufacturing; (3) financial services and insurance; (4) oil and gas; and (5) electricity and energy distribution/supply/retailing.

ASIC’s early observations are based on a desktop review of a sample of sustainability reports submitted by the listed entities.

ASIC has indicated its review of reports will continue over the coming months. As part of this work, it may engage with reporting entities about their disclosures. Final observations from ASIC’s review will be published in the second half of 2026.

Use of Disclaimers

A reporting entity may not use disclaimers that conflict with the statutory framework and objectives of mandatory sustainability reporting, since this may confuse or mislead users of the report. 

ASIC identified some disclaimers – either in, or proximate to, the sustainability report – that indicate users should not rely on the information contained in the sustainability report to make investment decisions, or that stated the entity took no responsibility for the accuracy or completeness of certain information.

Reasonable and Supportable Information 

Reporting entities should be mindful that the “reasonable and supportable” information available to them to identify climate-related risks includes information about past events, current conditions and forecasts of future conditions. This tracks paragraph 11 of AASB S2, which provides that “In identifying the climate-related risks and opportunities that could reasonably be expected to affect an entity’s prospects, the entity shall use all reasonable and supportable information that is available to the entity at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future conditions.”

ASIC indicated that it identified instances where, although assets and/or operations of reporting entities were previously disclosed as being financially impacted by extreme weather events in prior financial years (based on prior year financial reports and/or information announced to ASX), entities had not identified, or had not disclosed information about, similar risks impacting prospects over the short, medium or long term, or any related risk mitigation activities.

Disclosing Judgments, Assumptions and Measurement Uncertainty

ASIC indicated in its observations that reports should provide clear, effective and proximate disclosure of relevant judgments, assumptions and areas of measurement uncertainty.

ASIC indicated that, while it observed instances of entities disclosing their judgments, it also saw instances where users would be required to draw their own conclusions about why information was included or disclosed in a particular way, such as how the entity had applied the proportionality mechanisms in AASB S2.

ASIC further indicated that clear disclosure of assumptions and sources of estimation uncertainty supports users to understand the basis for forward-looking information.

Non-obscuration

In accordance with AASB S2’s fair presentation approach, disclosure of additional climate-related information must not obscure material climate-related financial information required to be disclosed under AASB S2. 

ASIC identified instances where material information in the sustainability report was not clearly distinguishable from additional, voluntary climate-related financial information. ASIC indicated that, while the inclusion of additional climate-related information that is not specifically required by AASB S2 may be necessary to ensure the fair presentation of the sustainability report, including additional climate-related information beyond this may pose the risk of obscuring material information.

ASIC further noted that index tables can be useful for setting out the location of information contained within the sustainability report.

Cross-referencing

Cross-referencing information outside the sustainability report must comply with the disclosure requirements in AASB S2 and guidance in ASIC Regulatory Guide 280. 

ASIC identified instances of reporting entities not meeting cross-referencing requirements. This included cross-referencing information contained on websites or in reports that were not published by the entity, or entities failing to precisely specify the part of the other report that was to be incorporated.

ASIC noted that a sustainability report can only cross-reference to another report published by the entity if it is available on the same terms and at the same time as the sustainability report. In addition, a cross-reference must refer to a precisely specified part of the other report.

If a reporting entity cross-references another report prepared by the reporting entity, ASIC strongly encourages the reporting entity to lodge the other report with its sustainability report if it has not already done so.

Targets

The ASIC observations indicate that reporting entities should carefully consider whether they have a “climate-related target.” ASIC noted that the definition of this term in AASB S2 extends to targets the entity is required to meet by law or regulation, including greenhouse gas emissions targets. ASIC indicated that, under AASB S2, climate-related targets are the “quantitative and qualitative climate-related targets an entity has set to monitor progress towards achieving its strategic goals, and any targets it is required to meet by law or regulation, including any greenhouse gas emissions targets” (paragraph 33).

ASIC observed varied approaches to disclosure requirements relating to climate targets, particularly how an entity determines what constitutes a climate-related target for purposes of AASB S2. It observed different approaches applied to the assessment of targets required to be met “under law or regulation.”

A Possible Modest “Simplification” of Australian Climate Reporting 

Earlier this month, the Australian government released its proposed budget. As part of reducing regulatory compliance burdens, the government is proposing changes that would impact mandatory sustainability reporting.

The government proposes to raise the monetary thresholds for large proprietary companies from A$50 million to A$100 million of consolidated revenue and from A$25 million to A$50 million of consolidated gross assets. Australian businesses that cease to meet the thresholds due to this increase would no longer need to lodge an annual audited financial report, directors’ report or sustainability report.

In addition, to improve the efficiency of climate-related financial disclosures, the government will consult on reforms to reduce the reporting burden, while maintaining core sustainability reporting requirements. These reforms include (1) improving consistency in the application of reporting requirements by clarifying how key concepts used in AASB S2, including “undue cost or effort,” apply in practice, (2) adjusting assurance settings to ensure they are proportionate and practical and (3) setting clearer boundaries on supplier information requests, to reduce costs and complexity, particularly for small businesses. ASIC is participating in the consultation.

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