Mandatory climate reporting has become a legal requirement across many major economies, including Australia. Organisations must disclose climate-related governance, risks and opportunities, greenhouse gas emissions, scenario analysis and transition planning. These disclosures are increasingly expected to meet similar rigour to financial reporting and may require third-party assurance.

Climate reporting is shifting from narrative sustainability disclosure to structured financial risk reporting. Finance teams must ensure disclosures are supported by credible data, governance processes and documented assumptions capable of withstanding regulatory, audit and investor scrutiny.

2025–2026: From policy design To implementation

Many jurisdictions are moving from climate policy development to active implementation. Australia, the UK, EU and some US states now require mandatory climate disclosures. The International Sustainability Standards Board (ISSB) has created a global baseline through IFRS S2 Climate-related Disclosures.

Entities must disclose governance arrangements, climate risks and opportunities, greenhouse gas emissions (Scopes 1 and 2, with Scope 3 phased in), transition plans where they exist, and the financial impacts of climate-related risks. Implementation challenges often arise in estimating financial impacts of climate scenarios due to uncertainty, modelling assumptions and incomplete data.

In Australia, mandatory reporting began for large entities in financial years starting 1 January 2025, with additional reporting cohorts phased in between 2026 and 2028. Many organisations are still establishing governance frameworks, emissions data systems and internal reporting processes.

Why this matters in 2026

Climate reporting is increasingly integrated into financial reporting and risk disclosures. Poorly supported or inconsistent disclosures may create legal, regulatory and reputational risks for organisations and directors.

Investors and lenders are increasingly using climate disclosures to evaluate risk exposure, capital allocation and long-term strategy. For organisations that did not fully implement reporting in 2025, 2026 represents a critical preparation year before regulatory scrutiny and assurance requirements intensify.

Purpose and scope of this guide

The guide explains global climate reporting convergence and outlines Australia’s regulatory framework. It provides practical guidance for organisations preparing disclosures in 2026 and helps multinational companies develop scalable reporting frameworks aligned with global standards while accommodating jurisdiction-specific requirements.

Global mandatory climate reporting

Most climate reporting regimes now follow a similar structure covering financial impacts, governance, strategy, risk management, emissions metrics and scenario analysis. IFRS S2 provides a global baseline adopted or adapted by many jurisdictions.

However, differences remain. The EU’s Corporate Sustainability Reporting Directive applies a double-materiality approach and covers broader sustainability topics. The UK has embedded climate risk disclosure through the TCFD framework and is transitioning toward ISSB standards. In the US, federal climate disclosure rules remain uncertain, though state requirements and international obligations influence corporate reporting.

Many jurisdictions, including New Zealand, Japan, Singapore and Canada, are developing ISSB-aligned regimes.

Australia’s mandatory climate reporting

Australia’s regime is aligned with IFRS S2 and implemented through Australian Sustainability Reporting Standards (ASRS). Oversight is shared between the Australian Accounting Standards Board (standard setting), ASIC (compliance and enforcement) and APRA (prudential guidance for financial institutions).

Reporting applies to companies and financial institutions meeting size thresholds. Group 1 entities report from 2025, Group 2 from 2026 and Group 3 from 2027. Climate disclosures form part of regulated corporate reporting.

Directors approving climate disclosures must meet the same duties of care and diligence as financial reporting under the Corporations Act 2001. Regulators expect clear documentation of assumptions, governance processes and internal consistency between sustainability disclosures and financial reporting.

Assurance will be phased in gradually, moving from limited assurance toward broader coverage over time.

Australia: Getting started or resetting climate reporting in 2026

Organisations preparing for reporting should prioritise establishing governance, defining reporting boundaries and identifying material climate risks. Climate reporting should be integrated within enterprise risk management rather than treated as a separate exercise.

Emissions data foundations must be established, including Scope 1, 2 and early Scope 3 assessments, supported by documented methodologies and data sources. Organisations should also assess climate impacts on strategy and financial planning using scenario analysis covering both low-warming and high-warming pathways.

Transition plans should distinguish short-term actions, medium-term structural changes and long-term innovation strategies. Climate risks should be embedded within enterprise risk frameworks and aligned with financial reporting assumptions.

Early engagement with auditors is recommended to clarify assurance expectations, document methodologies and ensure consistency between climate disclosures and financial statements.

Judgement areas and common red flags

Regulatory scrutiny often focuses on internal consistency rather than modelling sophistication. High-risk areas include defining reporting boundaries, determining material climate risks, estimating Scope 3 emissions and aligning scenario assumptions with transition plans.

Common red flags include unsupported claims, inconsistencies between narrative and data, unexplained methodological changes, and transition plans lacking financial credibility. Transparent documentation and defensible assumptions are critical to reducing regulatory risk.