The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 was introduced into Parliament on 27 March 2024. This draft legislation includes proposed amendments to the Corporation Act 2001 and the Australian Securities and Investment Commission Act 2001 which requires climate-related financial disclosures in a sustainability report that accompanies the financial report. The proposed amendments also require assurance by the auditor of the financial report on the climate-related financial disclosures. 

The AUASB has been directed to develop a pathway for phasing in assurance requirements from 2025 to 2030. The Consultation Paper; Assurance over Climate and Other Sustainability Information, presents a possible assurance phasing model and seeks to understand:

• The demand for assurance and the ability to meet the demand
• The support for the adoption of ISSA 5000 General Requirements for Sustainability Assurance Engagements (ISSA 5000), and
• The need for possible local pronouncements.

Feedback indicates that the assurance phasing model appears ambitious. There is a general consensus that many reporting entities currently lack readiness to prepare climate statements and they will need more time to produce quality data that is capable of being assured. In our view, to allow for a more realistic target:

• The commencement of mandatory assurance should be deferred for at least one year compared to the possible assurance phasing outlined in the CP where possible. In some cases, we acknowledge this will not be possible (e.g., scope 1 and 2 emissions).
• It would be optimal to commence mandatory assurance with ‘limited’ rather than ‘reasonable’ assurance in all topic areas, for all groups, rather than commencing with reasonable (e.g., governance, and scope 1 and 2 emissions for groups 2 and 3). 

CA ANZ and CPA Australia support the adoption of ISSA 5000 General Requirements for Sustainability Assurance Engagements (ISSA 5000) in Australia as the overarching assurance standard for climate and other sustainability information. 

We agree that the AUASB will need to develop a local pronouncement to supplement ISSA 5000. In our view the most pressing matters that will need guidance are (i) when an entity states climate risks and opportunities are not material; and (ii) when there is a mix of limited and reasonable assurance. The AUASB intends to issue an exposure draft of any local pronouncement in July or August 2024.

The accounting profession’s main concern relates to the requirement for all Group 3 entities to undergo an audit even if they have no material climate risks or opportunities. While it is not within the AUASB’s mandate, the legislation, as currently drafted, would result in a large skills and capacity gap which the AUASB would need to be cognisant of in determining the assurance phasing. If the Bill is finalised as currently drafted then auditors will need guidance from the AUASB on conducting a reasonable assurance engagement and providing an opinion over what is effectively a negative statement by the entity. We have expressed our concerns to the Senate Economics Legislation Committee in our joint submission to the Senate Economics Legislation Committee.