Australia progresses climate transition disclosures, planning

Australia is showing progress with disclosing and adopting its clean energy transition initiatives as investors' demand for credible emissions reduction strategies grows, a study from MSCI shows.

Among listed Australian companies analysed in the APAC Climate Action Progress Report that have disclosed transition plans, 92% are reporting on Scope 1, 2 and 3 emissions.

Over the last two years, the number of companies using science-based targets initiative (SBTI) has also risen from 31% to 38%.

Across the 837 companies analysed in the region, those committed to SBTI standards have doubled to 50% between 2023 and 2025.

MSCI head of Australia and New Zealand sustainability and climate research Kuldeep Yadav said as climate risks continue to move onto company balance sheets, the report underscores the importance of forward-looking data, robust standards, and credible transition pathways in supporting both investor confidence and regulatory alignment.

"We are working closely with clients to integrate both physical and transition risks into their investment process. This includes geospatial tools that model risk at the asset level and align with disclosure frameworks such as the Task Force on Climate Related Financial Disclosures, International Sustainability Standards Board and Australian Accounting Standards Board," he said.

In adopting ISSB standards, which are expected to take effect in 2026, Australia has the Safeguard Mechanism, which is the government's policy for reducing emissions among large industrial facilities.

The government's Powering Australia also aims to create jobs, reduce pressure on energy bills, and lower emissions by boosting renewable energy.

The study also found that real-economy decarbonisation in APAC may slow if governments continue to provide fossil-fuel subsidies.

"These subsidies can distort markets by keeping fossil-fuel prices artificially low, discouraging

clean-tech investment and reducing incentives for companies to take action in the near term," the report read.

The International Monetary Fund (IMF) categorises fossil-fuel subsidies into explicit and implicit forms.

Explicit subsidies are direct government payments or tax breaks that lower the cost of fossil-fuel production or consumption, while implicit subsidies arise from under-pricing the negative externalities of fossil fuel use or from forgone tax revenues.

"Most APAC markets have provided implicit fossil-fuel subsidies. Data suggests that they can slow the transition to a lower-carbon economy. For example, the Japanese government has offered gasoline subsidies since 2020. While these subsidies are intended to ease inflationary pressures, they can potentially contradict Japan's Nationally Determined Contributions (NDC) under the Paris Agreement," the study said.