Sustainability reporting update: ASIC’s early observations, reform consultation, and the TISFD draft framework

As deadlines for mandatory sustainability reporting approach for Group 1 entities with a 30 June financial year end, ASIC has published its early observations (based on its review of a subset of reports) on the first wave of sustainability reports lodged by Group 1 entities with a 31 December financial year end.

There have also been developments with respect to consultation on reforms to improve the efficiency of the climate-related financial disclosures framework.

In broader ESG developments, the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) has recently released its draft framework relating to labour-related impacts, risks and opportunities.

ASIC's early observations on sustainability reporting

ASIC’s early observations are based on its review of a subset of the 259 mandatory sustainability reports prepared by 31 December year end companies under the mandatory regime (34 from listed entities and 225 from unlisted entities).

ASIC firstly acknowledged a meaningful increase in the quantity and quality of climate-related financial information compared to previous voluntary disclosures, including the use of visual aids such as tables and diagrams in reports.

Areas of concern

ASIC identified six key areas requiring improvement:

1. Entities are not permitted to use disclaimers that conflict with the statutory framework and objectives of Chapter 2M. For example, ASIC identified some disclaimers that indicated users should not rely on the information contained in the sustainability report to make investment decisions, or that stated the entity took no responsibility for the accuracy or completeness of certain information. ASIC’s concerns are that such disclaimers could be confusing or, at worst, misleading, if they conflict with the statutory framework.
   
   Companies shouldn’t take that to mean ASIC no longer encourages disclaimers. On the contrary, ASIC’s guidance in Regulatory Guide 170: Prospective Financial Information, continues to make clear that disclaimers can be helpful in warning investors that forward-looking statements may be affected by known and unknown risks and uncertainties, and that forward-looking statements may differ materially from results ultimately achieved. As ASIC acknowledges in that guidance, forward-looking statement disclaimers can be important for ensuring users understand the risks in placing undue reliance on forward-looking information. They are not, however, a substitute for having reasonable grounds for forward-looking statements. We touch on these and related issues in our Mandatory Sustainability Reporting in Practice report. 
   
   
2. There were instances of entities previously disclosing financial impacts from extreme weather events (in previous financial reports and/or in ASX announcements) but not disclosing similar risks impacting future prospects. ASIC reminded entities that "reasonable and supportable" information includes “past events, current conditions and forecast future conditions”. 
   
   
3. Entities should ensure that any disclosure of judgments, assumptions and measurement uncertainty are clear, effective and proximate. ASIC stated that there were instances where:
   
   “users would be required to draw their own conclusions about why information was included or disclosed in a particular way. For example, in relation to how the entity had applied the proportionality mechanisms in [AASB] S2.”
   
   This reiterates ASIC’s former warnings that it will scrutinise entities’ approaches in relation to the application of exceptions and proportionality mechanisms under AASB S2. Robust and defensible sustainability records supporting judgment calls in these areas will be key to resisting a challenge.
   
   
4. Entities must not obscure material climate-related financial information with the disclosure of voluntary climate-related financial information. ASIC has observed instances of entities not clearly distinguishing between material and voluntary information included in sustainability reports. ASIC acknowledged that the inclusion of voluntary information may be necessary to ensure the fair presentation of the report, but that including additional information “beyond this” may risk material information being obscured. ASIC suggests index tables may be useful for outlining the location of information contained in the report. Importantly, the modified liability regime does not extend to voluntary disclosures, reinforcing the need for companies to have a clear understanding of what is mandatory and voluntary content.
   
   
5. Entities must ensure that cross-referencing meets the requirements in AASB S2 and ASIC Regulatory Guide 280: Sustainability Reporting, with ASIC identifying instances of non-compliance. For example, some entities cross-referenced information contained on websites or in reports that were not published by the entity. Some entities also failed to “precisely specify” the part of the other report to be incorporated.
   
   
6. Entities should “carefully consider” whether they have a ‘climate-related target’, with this extending to targets the entity is required to meet by law or regulation, including greenhouse gas emissions targets (such as the Safeguard Mechanism). ASIC observed varied approaches to the disclosure of targets, particularly around how entities determined what constitutes a target.

ASIC noted that its early observations are not based on a thorough review, and it will publish final observations in the second half of 2026.

Consultation on reforms to climate-related financial disclosures Following the 2026-27 Federal Budget, the government is prioritising consultation on reforms to improve the efficiency of the climate-related financial disclosures framework. The development of a Treasury discussion paper is expected in the coming months.

Proposed reform areas

The consultation will consider reforms that reduce regulatory burden while maintaining core requirements of sustainability reporting. The major areas of focus include:

• increasing consistency in the application of key concepts such as "undue cost or effort";
• adjusting assurance settings to ensure they are proportionate and practical; and
• setting clearer boundaries on supplier information requests.

TISFD releases draft framework

The TISFD, an international initiative launched in 2025 to develop non-binding guidance for entities to report on labour-related impacts, risks and opportunities, has published its draft TISFD framework.

The framework builds upon the ISSB Standards, Global Reporting Initiative Standards and European Sustainability Reporting Standards. Its substantive topics include human rights, labour rights, inequality, well-being and human and social capital.

The framework outlines five general requirements for disclosure:

1. materiality (which filters what information is relevant for inclusion);
2. system-relevant information;
3. stakeholder engagement;
4. scope; and
5. time horizons.

The framework also contains a section on areas for further development, illustrating that it is likely to continue to evolve.

Public feedback is invited until 31 July 2026, with the final version expected in 2027. We’re continuing to monitor what it might ultimately mean for the international sustainability standards, with an IFRS Practice Statement on nature the next development expected there.