Coalition Senators' Dissenting Report

Coalition Senators' Dissenting Report

1.1Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 amends Australia’s financial market infrastructure (FMI) regulations and introduces a climate-related financial disclosure regime.

Schedules 1, 2, 3 and 5: Financial Market Infrastructure Reforms

1.2Schedules 1, 2, 3 and 5 implement reforms committed by the former Coalition Government in 2021. The majority of these reforms are welcomed by Coalition senators.

1.3FMIs include financial markets, clearing and settlement facilities, benchmark administrators, and derivative trade repositories. FMIs enable businesses, investors and governments to raise capital, access liquidity, manage risks, and invest funds.

1.4In the 2021-22 Federal Budget, the former Coalition Government committed to a series of financial market infrastructure regulatory reforms to ensure Australian regulators are fully equipped to identify and manage risks or intervene in an FMI failure crisis. The reform package included:

allowing the Reserve Bank of Australia (RBA) to manage a failure at a clearing and settlement facility;

enhancing the supervisory and licensing power of the Australian Securities and Investments Commission (ASIC) and the RBA; and

streamlining regulatory powers to improve the efficiency of regulatory administration.

1.5This announcement followed the recommendations by the Council of Financial Regulators in 2019. It also delivered on the recommendations of the 2014 Financial System Inquiry and the International Monetary Fund.

1.6Coalition senators consider FMI entities to play a critical role in the Australian market. Having sound regulations in place to manage crises and risks these entities have is therefore appropriate.

Transfer of power to the Minister to approve increases in voting power

1.7Coalition senators are concerned about the amendment proposed in the Bill to section 850B of the Corporations Act 2001 (Cth) (Corporations Act). This amendment would remove the requirement for increases in voting power above 15 per cent in ASX Limited to be approved through regulation and subject to disallowance in the Senate. Instead, the Minister would have total discretion to approve or reject such increases.

1.8In the case of foreign acquisitions, the Senate disallowance is a critical additional layer of oversight to prevent transactions that are not in the national interest. Where an acquisition is approved by the Foreign Investment Review Board (FIRB), the Parliament retains the power to disallow an acquisition under section 850B. This is a good thing.

1.9For instance, in 2011 Wayne Swan rejected the FIRB application of Singapore Exchange Limited who sought to acquire a majority share in ASX Limited. If the Minister of the day took a different view to Mr Swan, the Parliament could have exercised its powers to block the acquisition. These sorts of acquisitions could have an enormous impact on the Australian market. It is not appropriate that a Minister in future, if they took such a view, could approve an application like that of Singapore Exchange Limited, without any further democratic scrutiny.

1.10There is also significant concern around domestic acquisitions. These transactions, which are not subject to a FIRB application, will now have a single regulatory hurdle to jump in acquiring a stake of over 15 per cent in the ASX: the Minister.

1.11The ASX is not just another widely held market body. It has a monopoly on clearing and settlement in Australian financial markets. As a recent report by the Parliamentary Joint Committee on Corporations and Financial Services noted:

The ASX Group is a vertically integrated exchange and market infrastructure provider. Subsidiaries ASX Clear and ASX Settlement have a monopoly in providing cash equities clearing and settlement facility services. They facilitate the clearing and settlement trades in ASX-listed and non-ASX-listed securities.[1]

1.12If an institutional investor were to be granted a controlling interest in ASX Limited, this institutional investor could then exert significant influence on Australia’s financial markets and economy. Currently, UniSuper and AustralianSuper already have 13.2 per cent and 7.6 per cent ownership of ASX Limited respectively.[2]

1.13The argument of “regulatory consistency” is not compelling on its own in this case given the ASX’s monopoly status, particularly if the proposed change involves reducing Parliamentary scrutiny and oversight over Australia’s financial market infrastructure and handing powers exclusively to the Minister. Furthermore, the ASX noted that all the widely held market bodies currently prescribed in regulation are part of the ASX group:

ASX notes that all of the markets and clearing and settlement facilities prescribed as widely held market bodies are part of the ASX group, although some are referred to by previous names.[3]

1.14The Coalition position is not that increases in ownership of ASX Limited should not be allowed. Rather, Coalition Senators are of the view that the Parliament should retain some sovereignty over the approval of such applications for increased control beyond the legislated limit, instead of leaving it entirely to the Minister of the day.

1.15On notice, the ASX informed the committee that they were not aware of any occasion where they have received advice from the Treasurer of any intention to deploy regulations allowing an investor to exceed the prescribed ownership limits under section 850B(1)(c), nor are they aware of any occasion wherein an institutional investor has sought or applied for increased ownership beyond the 15 per cent threshold.[4]

1.16If this regulation-making power has never been used before, then it's not clear what the problem is and what immediate rationale there is for removing it and transferring the approval mechanism entirely to the Treasurer.

1.17At the public hearing, the ASX said that they did not advocate for this change as part of the consultation on legislation:

Senator DEAN SMITH: Did you ask for it from the government?

Ms Lewis: No, we did not. We did not discuss those issues—

Senator DEAN SMITH: Did you ask the government to remove it until you had an opportunity to properly consult and consider your views on the matter?

Ms Lewis: No, we didn't. We didn't engage with policymakers on this issue at all. We were focused on the implementation of the other aspects of the crisis resolution regime, as we felt that they were the more important issues, as part of the legislative package, for ASX to engage on.[5]

1.18The Treasury confirmed this during their appearance before the Committee:

To my knowledge, my experience of the consultation process was consistent with ASX's comments earlier. They didn't actually engage with this part of the reforms that heavily.[6]

1.19Furthermore, on notice, the ASX said this was a matter for the parliament:

Ensuring appropriate oversight of material changes in the voting interests in important financial sector entities is ultimately a matter for the Parliament.[7]

1.20Based on the evidence received through this inquiry, Coalition Senators see no reason for why this change must proceed at this time, as part of the legislative package before this Committee.

1.21Regrettably, at the time of tabling, the Committee has not received answers to extensive questions on notice lodged with the Treasury on this matter.

Recommendation 1

1.22That the Bill be amended to retain the requirement for regulations to be made for the purpose of subsection 850B(1)(c) of the Corporations Act 2001, and to retain their disallowability under subsection 850B(2).

Schedule 4: Sustainability Reporting

Overview: A Significant Increase in Compliance That Has Been Under-scrutinised

1.23The Coalition retains significant concerns about the scope, design, and implementation of Schedule 4 of the Bill.

1.24The measures described in the Bill have been described by ASIC Chair Joe Longo as “the biggest change to company reporting in a generation”[8] – a point reiterated by the Australian Institute of Company Directors in their evidence to the committee.[9]

1.25Despite this, this committee was permitted just 14 days to receive submissions, just four hours of hearing time, and just a week to report what is a significant, permanent change to Australia’s corporate law.

1.26This is at a time when the Australian Law Reform Commission has noted in their report Confronting Complexity: Reforming Corporations and Financial Services Legislation that corporations law complexity is harming the Australian economy:

Judges have described the current [corporations and financial services] laws as being like ‘porridge’, ‘tortuous’, ‘treacherous’, and ‘labyrinthine’. Others have described the legislation as ‘broken’. Complexity in the existing legislation is not an isolated problem — it costs businesses, consumers, investors, and the economy at large.[10]

1.27The Explanatory Memorandum notes that “Schedule 4 to the Bill is expected to increase regulatory costs by $1.0 to $1.3 million per year per entity, averaged over 10 years.”[11]

1.28Spread across the 1800 entities Treasury estimate will be captured at a minimum,[12] that compliance cost could reach a potential annual cost of $2.3 billion to the economy.

1.29The Cost Impact Analysis for the scheme notes the cost of modelling scope 3 impacts to under the preferred option (1b) at $245000 a year during the transitional period and $161700 ongoing.[13]The total ongoing compliance cost for captured entities will be in the scheme of $681000, with a transitional cost of $1.3 million.[14]

1.30Across the minimum of 1800 entities the Treasury expect to be captured, the cost to the economy will settle at $1.23 billion per year. The Policy Impact Statement lays out the following compliance cost estimates:


Transitional Cost ($)

Ongoing Cost ($)

Familiarisation and education costs



Legal Review



Systems changes



Data collection



Scenario analysis



Scope 3 modelling



Preparation of climate report









1.31According to the Policy Impact Analysis, this is a higher cost than the United States, New Zealand, the United Kingdom.[15]

1.32The compliance cost is particularly onerous when considering the additional context elucidated through this committee:

75 per cent of ASX listed companies already voluntarily disclose climate related information to investors because they see a commercial imperative to do so.[16]

The vast majority of companies captured as Group 3 entities will be forced to do due diligence, and be vulnerable to enforcement action, regardless of materiality of risks.[17]

The lack of case law to determine subjective tests within the legislation, and the associated legal costs for companies.[18]

The lack of workforce to undertake the work associated with a fully assured regime, particularly if Australia’s reporting framework differs from major markets like the United States.

The clear appetite for climate litigants submitting to this committee to use the law to pursue potentially vexatious litigation and pressure regulatory action from ASIC and the ACCC.[19]

The willingness of ASIC to pursue enforcement actions during the modified liability period.[20]

The inability of any witness to ascertain whether the Australian Accounting Standards Board (AASB) standards would be completed by the proposed commencement date.[21]

The competition impacts: both to small and medium accountancy and audit firms,[22] and to businesses seeking to win contracts within the supply chain of captured entities.

1.33As the ALRC has noted upon release of its review of the corporations law (emphasis added):

Complexity costs consumers not only in the expenses that are passed on by financial services providers, but by failing to protect them from misconduct. The Royal Commission clearly demonstrated the economic and human costs of non-compliance with the law. [Simpler regulation] would strengthen consumer protection substantially and reduce costs for business by making the law simpler to comply with and easier to enforce.[23]

1.34The Senate inquiry did not hear from a major employer group or business operator about the mechanical and realised financial impact of complying with these laws on their business, their customers, or their supply chains. Evidence that was particularly lacking due to the limited scope of the inquiry were the impacts to small businesses in captured entities' supply chain, or emissions intensive industries like manufacturing, agriculture, forestry, transport, or resources.

1.35The Coalition has significant concerns about rushing this proposal through without that evidence, particularly in light of evidence from witnesses and the growing impact of compliance costs to Australia’s collapsing productivity.

1.36ASIC noted the inclusion of scope 3 emissions will mean that compliance for captured entities will be passed on to small businesses.[24]ASIC noted that this issue is of significant concern to the Australian Small and Family Business Enterprise Ombudsman.[25]

1.37In consideration of the United States disclosure rules, the Securities and Exchange Commission (SEC) noted the compliance impact of small and private companies in the supply chain as a significant concern in their consideration of their final reasons for excluding scope 3 from the United States’ regime, stating:

A number of commenters representing entities not subject to the Commission’s disclosure authority raised serious concerns about the costs and burdens they could face as a result of the requirement on registrants. Among those costs, they highlighted not only the cost of collecting and reporting information but also the potential competitive disadvantage for smaller suppliers, if registrants select larger suppliers that may be in a better position to supply information to use in their Scope 3 emissions disclosures.[26]

1.38It is also unclear, and has not been addressed substantively in submissions, on the role sustainability standards may play in dictating captured entities preparedness to offer essential financial products and services to non-captured entities. The law as proposed is significantly different from other regimes:

Captures a wider group of entities at lower thresholds than the UK, New Zealand, or proposed Canadian and US models.[27]

Requires scope 3 emissions reporting, which has been excluded by the SEC, was excluded from the Canadian draft scheme, and is not mandatory under the United Kingdom scheme.[28]

Requires wider assurance of elements of the mandatory reporting scheme, despite significant questions about the extent to which they can be effectively assured at all.[29]

1.39These three points are particularly significant in respect to the treatment of scope 3 emissions. Contrary to the view expressed by many witnesses to the committee, the SEC noted in its final rule decision on the USA’s climate disclosure regime a volume of significant concerns with scope 3 reporting, noting its unreliability, the difficulty of its collection, and its costly compliance burden.

1.40In the SEC’s own words: “these concerns would increase compliance costs and raise a registrant’s liability exposure so that the total cost of the scope 3 emissions disclosure would likely exceed its benefit”.[30]

1.41Given the scope of this reform, the significant annual compliance cost, and significant variation from international standards, a more thorough evaluation of this legislation is essential to ensure Australia retains its economic competitiveness and that the regime - which will be subject to enforcement and litigation – is practical, feasible and does not leave small businesses or consumers behind.

1.42Accordingly, while Coalition senators will give consideration to amendments raised through the hearing and submissions, the Coalition will continue to reserve its final position on the schedule until it is satisfied these concerns are properly addressed.

Recommendation 2

1.43The Senate should extend the committee’s consideration of this legislation, and additional hearings be scheduled to hear from a diverse range of witnesses, including small business representatives, to contemplate the impacts on supply chains, the regulatory burden, access to finance, and competition.

Background of the bill

1.44Australia is the 14th largest economy in the world in the great gross domestic product race because it is a stable, innovative market with strong corporate law settings. These features are critical in attracting the investment that allows Australian businesses to thrive.

1.45It is essential that the Australian market remains aligned with international standards and responsive to the concerns of investors and stakeholders.

1.46The global market is making a long-term shift to a lower emissions future.

1.47As former Treasurer, the Hon. Josh Frydenberg MP stated in an address to the Australian Industry Group in 2021:

Climate change and its impacts are not going away. It represents a structural and systemic shift in our financial system, which will only gain pace over time. For Australia, this presents risks we must manage and opportunities we must seize.[31]

1.48In the same speech, the former Treasurer signalled the Coalition Government’s focus on establishing a clear reporting framework for the disclosure of material climate risks.

1.49Rather than banning investments in particular assets or activities, or prescribing certain approaches, the Coalition’s focus was on arming businesses with the right tools to assess, manage, and disclose the risks they face in a proportionate and pragmatic manner.

1.50This was a recognition that climate change is an economic imperative as much as it is an environmental one. The Research Bank of Australia found in its 2020 Financial Stability Review that:

Climate change is exposing financial institutions, and the financial system more broadly, to risks that will rise over time and, if not addressed, could become considerable... Addressing these early will help to both mitigate the transition risks and reduce the scale of the challenge that physical risk poses to financial stability in future.[32]

1.51Alongside the risks, there is also great opportunity.

1.52A Deloitte Access Economics and National Australia Bank report found that productivity and innovation arising from decarbonisation could grow Australian export opportunities by $420 billion by 2050.[33]

1.53The Bill before the Committee represents the Labor Government’s approach to climate-related disclosures. Coalition senators are supportive of the concept, but remain concerned by several aspects of the Bill that have not been given sufficient consideration by the Government.

1.54It is regrettable that the Government has sought to rush Senate scrutiny of this proposed scheme.

1.55The Bill was introduced to the Parliament and referred to the Committee late in the last week of parliamentary sitting. Stakeholders were then given a week between the due date for submissions being published and the deadline to lodge a submission with the Committee.

1.56The Law Council of Australia informed the Committee that “[s]ignificant concern has been expressed from all corners of the legal profession about the extraordinarily short timeframe for this inquiry.”[34] The Law Council went on to say:

This is particularly concerning given—to borrow the words of Australian Securities and Investments Commission (ASIC) Chair Joe Longo—that Schedule 4 to the Bill is the “biggest change in the financial services sector in a generation” resulting in a “seismic shift” for corporates and investors.[35]

Summary of the regime

1.57The Bill requires entities with reporting obligations under Chapter 2M of the Corporations Actto disclose climate-related financial risks and opportunities in accordance with the sustainability standards made by the AASB.

1.58The regime captures the following entities:

Group 1: An entity with a consolidated revenue of $500 million or higher, or consolidated gross assets of $1 billion or higher.

Group 2: An entity with a consolidated revenue of $200 million or higher, or consolidated gross assets of $500 million or higher.

Group 3: An entity with a consolidated revenue of $50 million or higher, or consolidated gross assets of $25 million or higher.

1.59The disclosures must include information around scopes 1, 2 and 3 emissions. The Explanatory Memorandum provides the following guidance on what those disclosures require:

Scope 1 greenhouse gas emissions are direct greenhouse gas emissions that occur from sources that are owned or controlled by an entity.

Scope 2 greenhouse gas emissions are indirect greenhouse gas emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by an entity. Purchased and acquired electricity is electricity that is purchased or otherwise brought into an entity’s boundary. Scope 2 greenhouse gas emissions physically occur at the facility where electricity is generated.

Scope 3 greenhouse gas emissions are indirect greenhouse gas emissions (not included in scope 2 greenhouse gas emissions) that occur in the value chain of an entity, including both upstream and downstream emissions, including financed emissions.[36]

1.60Disclosures made by reporting entities must be assured by auditors.

1.61The obligations under the regime will be phased in over a four-year period, with the first round of disclosures to be made after 1 July 2025.

There is space for pragmatic and sensible disclosures

1.62It is the position of Coalition senators that it would be appropriate for a pragmatic and sensible mandatory climate-related disclosure regime to apply to Group 1 and 2 entities who face material climate risks and opportunities. There are three key reasons for this:

(a)It would streamline and improve the quality of disclosures that are already being made on a voluntary basis.

(b)It would prevent poor decision-making, misallocation of capital, and the mispricing of assets.

(c)It would make Australian businesses more attractive for investment and improve investor confidence.

1.63High quality disclosures have the ability to improve access to capital and productivity.

1.64A study of disclosures under the US Carbon Disclosure Project found that reporting firms had a 19 per cent greater access to capital than non-reporting firms.[37] The Productivity Commission’s 5-year Productivity Inquiry February 2023 Report found a link between high-quality, useful climate information and productivity.[38]

1.65In 2023, 88 per cent of ASX100 companies included environmental, social, and governance (ESG) or sustainability information in their annual financial reports.[39] 75 per cent of ASX200 companies have committed to reporting their climate risks and opportunities in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD) framework.[40]

1.66Companies like BHP, RioTinto, and Transurban have already begun publishing high quality disclosures, acknowledging the importance of this information for investors, long-term planning, and international alignment.[41]

1.67Mandatory disclosure regimes are emerging in over half of Australia’s top ten two-way trading partners.[42] Regimes are in place in New Zealand, Hong Kong and the European Union, and soon to be in the United States, United Kingdom and Canada. The importance of keeping in-step with other competitive destinations was highlighted by the Governance Institute of Australia:

It's very important for Australia to be able to be aligned internationally. We are a country which is an attractive investment country, particularly for overseas pension funds, and we need to be able to produce the sort of high-quality disclosures that these investors require.[43]

1.68The absence of a streamlined process for making disclosures has meant that “voluntary disclosures differ in content, depth and rigour… and thus suffer from a lack of comparability and transparency.”[44] According to the Investor Group on Climate Change:

[M]any of our investors, because their legal obligation is to deliver on the best long-term financial returns of their members, were seeking to invest in other countries to deliver those returns because they had clearer frameworks to understand what companies were doing and what companies were not doing.

We had an alphabet soup of different approaches across various jurisdictions. We needed to align those to avoid market fragmentation and inefficient capital allocation. Also, the accelerating race to net zero was seeing opportunities emerge in other jurisdictions which had these better disclosure frameworks, which was driving Australian investment offshore.[45]

1.69The vast majority of witnesses to the Committee agreed that the cost of compliance for Group 1 and 2 entities was justified by the benefits for those businesses:

We recognise that there will be a bit of a cost, in terms of implementation, but we also recognise the big benefits of this bill to enable allocators of capital to price in climate risk. I think we also see, broadly, potential cost savings because, as we noted before, particularly in the ASX 200, a lot of companies are already reporting their climate risk but what this regime will do is to help standardise that sort of reporting. So we see a potential cost saving there as well.[46]

1.70The overvaluation of an entity’s risk profile in the absence of a standardised regime may also lead to the misallocation of capital:

A lack of adequate information on climate risk and opportunities is contributing to overvaluation of emissions-intensive activities, underpricing of climate change risk and mispricing of assets. This results in poor decision-making and the misallocation of capital.[47]

1.71For Australian businesses with a consolidated revenue of $200 million or higher, the transition to mandatory disclosure will be relatively intuitive.

1.72However, there are significant methodology and data gaps which make scope 3 emissions much more difficult to disclose when compared to scopes 1 and 2.[48]

Disproportionate application to small and medium businesses

1.73Coalition senators are concerned that the Bill places a disproportionate compliance burden on Group 3 entities, the vast majority of whom do not have any material impact on the climate. This is inconsistent with the Government’s supposed “climate first, but not only” approach outlined in the Explanatory Memorandum.[49]

1.74Group 3 entities, those with a consolidated revenue of $50 million or higher, will only be required to disclose material climate risks and opportunities.

1.75The problem identified by numerous witnesses is that firms can only assess materiality after conducting an audit. In practice, the materiality requirement does not ease the burden of reporting for these businesses:

Our members consider this imposes a significant and unjustified regulatory and cost burden on these companies. It effectively imposes a requirement for an additional audit on a sector which is already under resource and cost constraints, noting that limited assurance will initially be required. An audit of this type of statement is not a ‘tick and flick’ exercise.[50]

1.76Treasury Policy Impact Analysis found that “only 5 per cent of Group 3 companies have material climate risk and would be required to report.”[51]

1.77This means that the vast majority of Group 3 businesses will be required to undertake a costly audit and seek external assurances, all to find that they have nothing to report.

1.78The costs to these businesses are significant and appear to outweigh any perceived benefits to the economy.

1.79Nexia Australia estimates that the costs to Group 3 entities could be in the ranges of:[52]


Approximate cost range

First year implementation reporting

$30,000 - $70,000

Ongoing annual reporting

$20,000 - $40,000

Limited assurance of climate reporting

$15,000 - $30,000

Reasonable assurance of climate reporting

$25,000 - $50,000

1.80This Dissenting Report has noted that a mandatory disclosure regime has the potential to improve access to capital by providing the information investors see as important in their risk assessments. It is a major concern to Coalition senators that the benefits canvassed may be achieved even if Group 3 entities are not captured.

1.81Group 3 entities are small and medium sized Australian businesses, usually closely-held by family groups with few or no external stakeholders.[53] Critically, these businesses very rarely receive foreign capital.

1.82The Governance Institute and the Australian Institute of Company Directors gave the following evidence:

Senator DEAN SMITH: Does lifting the scope 3 threshold, in the manner suggested by you both, to $100 million compromise or undermine this initiative in terms of meeting our international obligations but also in bringing forward foreign investment to Australia? Does lifting the threshold compromise either of those two things?

Ms Maxwell: … One of the things to think about is that larger investors, particularly from overseas, do not typically invest in these companies. They're really at a scale where they don't operate. They typically have few outside investors, and their investors are very close to them. Treasury has also done some analysis and considers that a very small number of companies in that group will be impacted. We don't think this will negatively impact attractiveness to capital, because you don't typically get outside capital in those entities.[54]

Mr Gergis: … Given the ISSB standards are primarily investor focused, there is a strong case to narrow the application. … We want to make sure that any reporting, any compliance burden, that is imposed on business is proportionate and necessary, and we're just not convinced, with current thresholds, that that is appropriate for the group 3 entitlement as currently put into bill.[55]

1.83The Australian Institute of Company Directors’ submission pointed the Committee to difficulties with generating information on scope 3 emissions, scenario analysis, and forward-looking statements for Group 3 entities:

We are particularly concerned that some of the Sustainability Standard disclosures, such as scope 3 emissions, scenario analysis and complex forward-looking disclosures, will not be relevant or useful to Group 3 entity users. This appears to be acknowledged by the AASB itself. … [T]he cost of reporting against the full gamut of climate reporting requirements is likely to be significant, and disproportionate to the individual impact of those entities. Research suggests that significant uplifting in climate reporting practices is required to satisfy ISSB-based reporting, even amongst the largest Australian companies, let alone Group 3 entities which are significantly smaller and resource-constrained.[56]

1.84The Government has not justified the time, cost, and resources small and medium businesses will be required to dedicate to complying with this regime:

Treasury has not indicated how Scope 1, Scope 2 and Scope 3 greenhouse gas data and other mandated climate-related information reported by Group 3 entities is intended to be collated and used by either governments or others. Extending mandatory climate reporting to large proprietary companies would impose significant time, cost, and resource burden of preparing and auditing such information without explaining to this cohort the purpose, usefulness, or expected benefits of doing so.[57]

1.85Nexia Australia recommended that Group 3 entities be removed entirely from reporting obligations under the Bill.[58]

1.86The Australian Institute of Company Directors and the Governance Institute recommended that the revenue threshold for Group 3 entities be lifted from $50 million to $100 million, and the gross assets threshold from $25 million to $50 million.[59] This would align the regime with other, similar reporting obligations under Australian law, such as those under the Payment Times Reporting Scheme, the Modern Slavery Act, and the Corporate Tax Transparency Code.[60]

Recommendation 3

1.87That Group 3 entities be removed entirely from the regime. Alternatively, that the threshold for Group 3 entities be increased to $100 million in gross revenue or $50 million in gross assets.

1.88If the Government does not heed the witnesses’ advice, it is appropriate that additional safeguards be included in the Bill to ease the burden on Group 3 entities.

1.89Witnesses told the Committee that a simplified disclosure regime would be appropriate for the size of these entities. They pointed the Committee’s attention to the ‘Simplified Disclosures’ Tier 2 financial reporting framework which came into effect on 1 July 2022.[61] An adjustment of this kind would be consistent with the approach taken in the European Union.

Recommendation 4

1.90In the event that Group 3 entities remain covered by the regime, those entities should be subject to simplified climate reporting standards, similar to the simplified financial accounting standards that apply to Tier 2 reporting entities. Critically, the requirement of an audit of a statement of no material climate risks or opportunities should be removed.

Additional concerns

Ministerial direction

1.91Proposed subsections 296A(4)-(5) and 296C(2) arm the Minister with broad, unfettered discretion to require disclosure of “financial matters concerning environmental sustainability” in an entity’s sustainability report through legislative instrument. According to Baker McKenzie:

The power conferred on the Minister … to require disclosures beyond those mandated by the legislation or the sustainability standards is unacceptably broad. The current Bill is the culmination of a lengthy consultation process, attesting to the fact that climate-related disclosure raises significant and complex policy issues. It follows that any proposal to expand the suite of disclosures should be subject to a comparable process of policy formulation, public consultation and legislative scrutiny, and is not an appropriate subject of delegated, Ministerial power.[62]

1.92Herbert Smith Freehills told the Committee that while any legislative instruments created under these powers would be disallowable, “the regime could nonetheless be broadened significantly without due consultative processes or fulsome legislative oversight.”[63]

1.93It was anticipated by witnesses that the Minister could seek to expand disclosures to matters beyond climate,[64] lower the monetary thresholds for mandatory reporting,[65] or otherwise make substantive policy amendments which would go beyond “minor or technical matters” appropriately dealt with by delegated legislation.[66]

1.94Witnesses pointed the Committee’s attention to a recent report by the Australian Law Reform Commission concerning the Corporations Act, which identified broad ministerial discretion as a particular problem creating unnecessary complexity and obfuscation.[67]

1.95Herbert Smith Freehills, the Governance Institute, the Australian Institute of Company Directors all agreed that the Minister’s discretion should be subject to express requirements of industry consultation.[68] Baker McKenzie and the Law Council were more critical, recommending those matters be subject to the proper legislative process.[69]

Recommendation 5

1.96That the Minister’s proposed discretion in sections 296A(4)-(5) and 296(C) to require disclosure of “financial matters concerning environmental sustainability” be removed, or subject to explicit requirements of industry consultation.

Modified liability

1.97Coalition senators are concerned that the potential benefits of the regime must not be undermined by vexatious private litigation.

1.98The Law Council told the Committee that it is preferable that compliance remains the responsibility of the regulator for the first few years of the regime’s operation:

Reserving legal action for ASIC over the transitional period has the added advantage of utilising less expensive and/or time-consuming compliance and enforcement tools prior to considering legal proceedings (including the redirection power in the proposed section 296E in the Bill)—whereas private litigation can be a more blunt compliance tool by comparison. The threat of private litigation may also result in conservative, bare minimum disclosures by reporting entities out of fear of getting it wrong in the early years of the regime. Given that the overriding policy objective is transparency through expanded, high-quality disclosures, this would be an undesirable result—noting that affected entities will likely be in the process of understanding their reporting obligations and how to best discharge them.[70]

1.99There was also a view that the modified liability protections included in the Bill should be extended to protect statements replicated outside of Sustainability Reports or Audits Report, including in investor briefings or company websites:

It is common practice for statements or information in a company's accounts or annual report to be duplicated elsewhere – for example, in investor presentations, in various sections of the company's website, and so on. In the context of climate-reporting, excluding such statements from the modified liability regime seems to us to be arbitrary and likely to yield incongruous outcomes – for example, by leaving directors exposed to liability for a statement made on their company's website, even though the statement is identical to a protected statement made in the company's sustainability report. This in turn is likely to discourage companies from engaging in open and effective communication with their stakeholders regarding those key areas of disclosure that the modified liability regime seeks to cover.[71]

1.100While private litigation concerning entity’s scope 3 disclosures, scenario analysis, and transition plans will be barred for the first three years of reporting, Coalition senators remain concerned that more should be done to prevent undue legal risk.

1.101The United States has taken a far more conservative approach. Its modified liability is not time-bound, and it explicitly covers disclosures regarding scenario analysis, transition planning, internal carbon pricing, and targets and goals disclosures. US businesses also have the benefit of existing safe harbour provisions for forward-looking statements, making litigation risk far less than for Australian firms.[72]

Recommendation 6

1.102That modified liability protections be extended to statements replicating information in a Sustainability Report or Audit Report in investor briefings, website statements, public addresses, or other like documents, and that further consideration be given to the appropriateness of compliance remaining with the regulator for an extended period.

Assurance requirements

1.103Proposed section 307AA requires a reasonable level of assurance of all climate disclosures for corporate reporting periods from 1 July 2030.

1.104GHD presented comprehensive evidence that such a broad assurance scope is not technically feasible, and goes well beyond the standards imposed in other jurisdictions:

Aspects of the final assurance scope is likely not technically feasible. Many stakeholders in Treasury’s consultations have expressed concerns that several aspects of mandatory climate disclosures may not be possible to assure. This is in addition to a significant challenge relating to whether and when key aspects can be expected to be ‘assurance ready’ by companies having matured their reporting processes sufficiently to enable professional standards-based assurance. An aspect that may be technically unfeasible to assure relates to assuring whether forward-looking climate risk and opportunity disclosures are complete and accurate.

Due to concerns about technical feasibility and costs most other jurisdictions are not aiming for a similar assurance scope. Noting for example the requirements under the EU Corporate Sustainability Reporting Directive (CSRD), which are leading internationally in defining sustainability assurance requirements. Under the CSRD there is an aspirational objective of reasonable assurance of all disclosures – but it is not committed to yet because the EU recognises feasibility, capability and costs concerns may make it unrealistic to achieve. Accordingly, under the CSRD there will be an assessment after 4 years of what is possible and valuable to assure by the early 2030s. For Australia to fix by an Act of Parliament the final scope for all climate disclosures to undergo reasonable assurance by early 2030s is therefore clearly not internationally aligned.[73]

1.105The relevant auditing standards to be developed by the Auditing and Assurance Standards Board are not contemplated to operate until 1 July 2030. There is also a major capability gap of auditing professionals to conduct this level of assurance:

We also note concerns with market availability and the need to develop capability across the Australian economy for third party assurance. … This expectation may place an undue burden on auditing professionals, particularly given the existing concerns around market capacity.[74]

1.106It is therefore appropriate that the assurance requirements be given further consideration before imposing an obligation on entities that they may find impossible to meet.

Recommendation 7

1.107That the mandatory reasonable level assurance requirements of section 307AA be removed and an assessment be done after four years to consider what is possible and important to assure by early 2030.

Senator Andrew Bragg Senator Dean Smith

Deputy ChairSenator for Western Australia

Senator for New South Wales


[1]Parliamentary Joint Committee on Corporations and Financial Services, Statutory inquiry into ASIC, the Takeovers Panel, and the corporations legislation - Competition in clearing and settlement and the ASX CHESS Replacement Project: The CHESS Replacement Project is too important to fail, April 2024, p. 36.

[2]ASX - 001: Answers to Written Questions on Notice Asked by Senator Andrew Bragg - (received 29 April 2024), p. 2.

[3]ASX - 001: Answers to Written Questions on Notice Asked by Senator Andrew Bragg - (received 29 April 2024), p. 2.

[4]ASX - 001: Answers to Written Questions on Notice Asked by Senator Andrew Bragg - (received 29 April 2024), p. 1.

[5]Dialogue between Senator Dean Smith and Ms Diane Lewis, General Manager, Regulatory Strategy and Executive Adviser, Australian Securities Exchange, Committee Hansard, 23 April 2024, p.22.

[6]Mr Nicholas Milkey, Acting Director, Capital Markets Unit, Department of the Treasury, Committee Hansard, 23 April 2024, p. 39.

[7]ASX - 001: Answers to Written Questions on Notice Asked by Senator Andrew Bragg - (received 29 April 2024), p. 2.

[8]Australian Institute of Company Directors; Deloitte; Minter Ellison, A director’s guide to mandatory climate reporting, 3 October 2023, p. 2,

[9]Ms Louise Petschler, General Manager, Education and Policy Leadership, Australian Institute of Company Directors, Committee Hansard, 23 April 2024, p.7.

[10]Australian Law Reform Commission, Media release, 18 January 2024. “ALRC recommends confronting complexity in corporations and financial services legislation”,

[11]Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill, Explanatory Memorandum, p. 6.

[12]Ms Rebecca McCallum, Director, Climate Disclosure Unit, Department of the Treasury, Committee Hansard, 23 April 2024, p. 35.

[13]Office of Impact Analysis, Policy Impact Statement, Climate risk disclosure, 17 January 2024, prepared by the Department of the Treasury, September 2023, Office of Impact Analysis, Table 13, p. 27-28.

[14]Office of Impact Analysis, Policy Impact Statement, Climate risk disclosure, 17 January 2024, prepared by the Department of the Treasury, September 2023, Office of Impact Analysis, Table 13, p. 27-28.

[15]Office of Impact Analysis, Policy Impact Statement, Climate risk disclosure, 17 January 2024, prepared by the Department of the Treasury, September 2023, Office of Impact Analysis, Appendix A, pp.4142.

[16]Ms Kate O'Rourke, Commissioner, Australian Securities and Investments Commission, Committee Hansard, 23 April 2024, p. 28.

[17]Ms Louise Petschler, General Manager, Education and Policy Leadership, Australian Institute of Company Directors, Committee Hansard, 23 April 2024, p. 8.

[18]Mr Christian Gergis, Head of Policy, Australian Institute of Company Directors, Committee Hansard, 23 April 2024, p. 9.

[19]Mr David Leighton Barnden, Principal Lawyer, Equity Generation Lawyers, Committee Hansard, 23April 2024, p. 13.

[20]Ms Kate O'Rourke, Commissioner, Australian Securities and Investments Commission, Committee Hansard, 23 April 2024, p.29.

[21]See Committee Hansard, 23 April 2024, pp. 5-6; 14-15; 19; 23; 25; 31 and 39 .

[22]Mr Martin Olde, Technical Director, Nexia Australia, Committee Hansard, 23 April 2024, p.17; Mr Leon Olsen, APAC Sustainability Service Line Leader, GHD, Committee Hansard, 23 April 2024, p.18.

[23]Australian Law Reform Commission, Media Release, 18 January 2024, “ALRC recommends confronting complexity in corporations and financial services legislation”, <,non%2Dcompliance%20with%20the%20law> (Accessed 2 May 2024).

[24]Ms Kate O'Rourke, Commissioner, Australian Securities and Investments Commission, Committee Hansard, 23 April 2024, p.31.

[25]Ms Kate O'Rourke, Commissioner, Australian Securities and Investments Commission, Committee Hansard, 23 April 2024, p.31.

[26]Securities And Exchange Commission, Final Rule: The Enhancement and Standardization of Climate Related Disclosures for Investors, 6 March 2024, pp. 228-229,

[27]Securities And Exchange Commission, Final Rule: The Enhancement and Standardization of Climate Related Disclosures for Investors, 6 March 2024, pp. 228-229,; HM Government, Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance, March 2019; Financial Markets Authority - New Zealand, Aotearoa New Zealand Climate-related Disclosures Director Preparation guide, December 2022,

[28]Fasken, BULLETIN: The SEC's Final Rules on Climate Related Disclosure and What They May Mean for Canadian Issuers, 13 March 2024,

[29]Mr Leon Olsen, APAC Sustainability Service Line Leader, GHD, Committee Hansard, 23 April 2024, p. 19.

[30]Securities And Exchange Commission, Final Rule: The Enhancement and Standardization of Climate Related Disclosures for Investors, 6 March 2024, p. 232,

[31]The Hon Josh Frydenberg MP, Address to the Australian Industry Group, Melbourne, 24 September 2021.

[32]Reserve Bank of Australia, The Australian Financial System: Financial Stability Review, October 2020,

[33]Deloitte and National Australia Bank, All systems go: Powering ahead, August 2023.

[34]Law Council of Australia, Submission 24, pp. 1-2.

[35]Law Council of Australia, Submission 24, pp. 1-2.

[36]Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, Explanatory Memorandum, p. 141.

[37]Millani, The Role of CDP Disclosure to Improve Access to Capital, October 2019,

[38]The Productivity Commission, Inquiry report – volume 6: 5-year Productivity Inquiry, Managing the climate transition, 7 February 2023.

[39]KPMG, Status of Australian Sustainability Reporting Trends, June 2023.

[40]ACSI, Promises, Pathways & Performance: Climate Change Disclosure in the ASX200, August 2023.

[41]BHP, Annual Report, 2023, p. 58; RioTinto, Annual Report, 2023, p. 13; Transurban, Corporate Report, 2023, p. 59.

[42]Investor Group for Climate Change, Confusion to Clarity: A plan for mandatory TCFD-aligned disclosure in Australia, 5 June 2021, p. 9.

[43]Ms Catherine Maxwell, General Manager, Policy and Advocacy, Governance Institute of Australia, Committee Hansard, 23 April 2024, p. 8.

[44]Aon, The Transition to Mandatory Climate Disclosures in Australia – The Essential Facts,

[45]Mr Erwin Jackson, Managing Director, Policy, Investor Group on Climate Change, Committee Hansard, 23 April 2024, p. 3.

[46]Mr Chaneg Torres, Policy Director Investments and Funds Management, Financial Services Council, Committee Hansard, 23 April 2024, p. 26.

[47]Investor Group for Climate Change, Confusion to Clarity: A plan for mandatory TCFD-aligned disclosure in Australia, 5 June 2021, p. 9.

[48]Insurance Council of Australia, Submission 14, p. 2.

[49]Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, Explanatory Memorandum, p. 139.

[50]Governance Institute of Australia, Submission 18, p. 3.

[51]The Australian Government the Treasury, Policy Impact Analysis: Climate-related financial disclosures, September 2023, p. 26.

[52]Nexia Australia, Submission 11, pp. 2-3.

[53]Nexia Australia, Submission 11, p. 2.

[54]Ms Catherine Maxwell, General Manager, Policy and Advocacy, Governance Institute of Australia, Committee Hansard, p. 9.

[55]Mr Christian Gergis, Head of Policy, Australian Institute of Company Directors, Committee Hansard, 23 April 2024, p. 9.

[56]Australian Institute of Company Directors, Submission 15, pp. 6-7.

[57]Nexia Australia, Submission 11, p. 2.

[58]Nexia Australia, Submission 11, p. 3.

[59]Australian Institute of Company Directors, Submission 15, p. 2; Governance Institute of Australia, Submission 18, p. 2.

[60]Governance Institute of Australia, Submission 18, p. 2.

[61]Governance Institute of Australia, Submission 18, p. 3.

[62]Baker McKenzie, Submission 26, p. 7.

[63]Herbert Smith Freehills, Submission 17, p. 3.

[64]Australian Institute of Company Directors - 001:Answers to Written Questions on Notice asked by Senator Andrew Bragg - (received 29 April 2024).

[65]Australian Institute of Company Directors - 001:Answers to Written Questions on Notice asked by Senator Andrew Bragg - (received 29 April 2024); Governance Institute of Australia - 001: Answers to Written Questions on Notice asked by Senator Andrew Bragg - (received 29 April 2024).

[66]Australian Institute of Company Directors, Submission 15, p. 8.

[67]Mr Christian Gergis, Head of Policy, Australian Institute of Company Directors, Committee Hansard, 23 April 2024, p. 10; Governance Institute of Australia, Submission 18, p. 4.

[68]Herbert Smith Freehills, Submission 17, p. 3; Governance Institute of Australia, Submission 18, p. 2; Australian Institute of Company Directors, Submission 15, p. 2.

[69]Baker McKenzie, Submission 26, p. 7; Law Council of Australia, Submission 24, p. 6.

[70]Law Council of Australia, Submission 24, p. 3.

[71]Baker McKenzie, Submission 26, pp. 4-5.

[72]Australian Institute of Company Directors, Submission 15, p. 3.

[73]GHD, Submission 21, pp. 8-9.

[74]Financial Services Council, Submission 10, p. 4.