ASIC’s early insights from the first wave of sustainability reports

Some preliminary observations from ASIC

ASIC has now released its initial observations from the first wave of sustainability reports for December year-end entities. The purpose of this release was to provide practical guidance to companies and their advisers as they prepare for the upcoming June reporting cycle. ASIC emphasised that these insights are preliminary, with a more comprehensive set of findings to be issued in the second half of 2026. 

ASIC’s key observations are as follows:

• Use of disclaimers: ASIC identified instances where disclaimers were inconsistent with the statutory framework and objectives of Chapter 2M sustainability reporting. ASIC expressed concern that disclaimers were potentially misleading to primary users – for example, where they suggested that users should not rely on the report or where they purported to limit responsibility for its accuracy or completeness. We remain of the view that disclaimers are important for legal protection, including to manage the expectations of users in relation to forward-looking statements. We’ve been working on ways to address potential concerns (noting that ASIC’s concerns have also been shared by the major audit firms) whilst still preserving appropriate legal protection.  
• ‘Reasonable and supportable’ information: ASIC reinforced that entities must consider current conditions and future conditions when assessing climate-related risks as well as past events. It noted instances where entities had previously disclosed that assets or operations were affected by extreme weather events (e.g. in prior ASX announcements) but those entities had not identified or disclosed information about similar risks impacting the entity’s prospects or in relation to risk mitigation.  
• Judgements, assumptions and uncertainty: Reports should include clear, decision-useful disclosure of key judgements, assumptions, and areas of measurement uncertainty. ASIC noted that in some reports, users were required to draw their own conclusions about why information was included or disclosed in a particular way (e.g. in relation to how the entity had applied the proportionality mechanisms).
• Clarity of additional or voluntary information: ASIC observed that additional or voluntary disclosures were, in some cases, unclear or poorly signposted. Such information should not obscure material climate-related disclosures.  
• Cross-referencing requirements: ASIC noted that entities must comply with AASB S2 and Regulatory Guide 280 requirements in relation to cross-referencing – specifically, that referenced materials must be available on the same terms and at the same time, and that cross-references must clearly identify the relevant sections of the document being incorporated.
• Safeguard Mechanism as a “target” under AASB S2: ASIC reminded entities that “climate-related targets” under AASB S2 include those mandated by law or regulation, such as greenhouse gas emissions targets under the Safeguard Mechanism.

Our observations

Our review of the first wave of reports identified a number of themes broadly consistent with ASIC’s findings. These included, for example, the treatment of Safeguard Mechanism obligations as a “target” and limited disclosure of key judgements, assumptions and areas of significant uncertainty.

Beyond ASIC’s observations, we also noted the following:

• Reliance on exemptions for quantification: Where entities provide only qualitative disclosures of current and anticipated financial effects, there is often little or no explanation of their reliance on the exemption, as required under paragraph 21. In particular, some entities are not sufficiently disclosing how they have applied the exemptions from providing quantitative information, and the subsequent disclosures.  
• Insufficient document trail: We have observed that many companies lack a robust documentation trail to support key judgements, significant uncertainties and underlying assumptions. For instance, where an entity relies on an exemption from quantifying financial effects, we could expect documentation detailing how the exemption was applied, the process followed in reaching that conclusion, and the rationale supporting that decision. In our view, reliance on such exemptions constitutes a significant judgement under AASB requirements and should be clearly evidenced.
• Conflation of key Strategy concepts: We have observed conflation of the core components within the Strategy pillar. In particular, some companies are not clearly distinguishing between:
  • the identification and assessment of climate-related risks and opportunities;
  • the use of scenario analysis based on hypothetical scenarios; and
  • the determination of current and anticipated financial effects that are reasonably expected.

This reinforces the importance of working through each requirement individually, and having regard to the supporting guidance that underpins them.