ASIC flags disclosure flaws in mandatory climate reports

The Australian Securities and Investment Commission (ASIC) has raised concerns over the use of misleading disclaimers, inconsistent climate risk disclosures and unclear reporting assumptions in the first round of mandatory sustainability reports lodged under Australia's new climate disclosure regime.

In early observations released ahead of the 30 June 2026 reporting season, ASIC said the overall standard of climate related reporting has improved significantly compared to previous voluntary disclosures, with the new mandatory framework delivering greater consistency, comparability and depth of information for investors.

The regulator reviewed a subset of sustainability reports lodged by Group One entities, the first cohort required to comply with mandatory climate reporting obligations under Chapter 2M of the corporations Act and AASB S2 Climate related Disclosures.

As of 6 May 2026, ASIC had received 259 sustainability reports tied to the December 2025 reporting period, including 34 from listed entities and 225 from unlisted groups. Mining related business construction and manufacturing firms, financial services groups, oil and gas companies and energy providers accounted for the largest share of lodgements.

While ASIC welcomed the effort made by reporting entities, it identified several areas where disclosures fell short of regulators expectations.

The regulator said some entities included disclaimers either within or near sustainability reports stating investors should not rely on the disclaiming responsibility for the accuracy of certain disclosures. ASIC warned such statements conflict with the statutory objectives of the regime and risk misleading users.

ASIC also identified instances where companies previously impacted by extreme weather events had not adequately disclosed similar climate related risks or mitigation strategies in forward looking sustainability reporting, despite those risks already appearing in financial statements or ASX announcements.

The regulator further pointed to inconsistent disclosure of assumptions, judgment calls and estimation uncertainty, warning that investors should not be left to infer why particular methodologies or proportionality mechanisms were adopted under ASSB S2.

ASIC also observed varied interpretations of what constitutes a "climate related target", particularly regarding legally mandated emissions obligations such as the Safeguard Mechanism.

Looking ahead, ASIC said its 2026 to 2027 surveillance program will focus on financial reporting areas involving significant judgement, including revenue recognition, asset impairment and financial instrument valuations, while also reviewing decommissioning and site restoration provisions.

ASIC Commissioner Kate O'Rourke said high quality reporting remained critical to market transparency and informed investment decisions.

"Our surveillance programs reinforce the importance of high-quality reporting and audit," O'Rourke said.

"Reliable financial information is critical to transparency in Australia's capital markets and informed investment decisions by investors."