Lockton has released a guide for Australian businesses in response to the country’s new mandatory climate disclosure regime.
Under legislation aligned with the Australian Sustainability Reporting Standards (ASRS), large companies are now required to report climate-related financial risks with the same level of detail and scrutiny as traditional financial disclosures.
The new rules place responsibility on directors to identify, assess, and disclose material climate risks – including both physical risks, such as extreme weather, and transition risks, such as regulatory or market changes – within their enterprise risk frameworks.
Lockton’s guidance aims to help organisations understand these obligations and develop strategies to remain compliant while managing emerging risks.
The guide details the steps needed to meet the new requirements and highlights the broader implications for risk management and insurance.
The ASRS-aligned framework makes directors accountable for ensuring that climate risks and opportunities are evaluated and disclosed in mainstream financial filings. This includes integrating climate risk into existing governance and risk management processes.
The accuracy and completeness of these disclosures are expected to be closely examined by investors, regulators, and insurers.
Inadequate or misleading reporting may expose businesses and directors to legal, reputational, and financial risks.
These developments are expected to influence directors and officers (D&O) insurance, with potential impacts on coverage, premiums, and underwriting standards.
Lockton emphasised that compliance with the new standards requires more than annual reporting.
Organisations are expected to conduct scenario analyses, collect emissions data, and implement internal controls that treat climate risk as a material enterprise issue.
Lockton’s guide recommends cross-functional collaboration between legal, risk, and finance teams to build credible climate resilience strategies.
Scenario planning is now considered essential for risk management. By modelling various climate futures, businesses can assess the potential impacts on operations, supply chains, and investment portfolios. This approach also supports evaluation of asset values and insurance coverage under different climate scenarios.
As more companies make environmental, social, and governance (ESG) claims, regulatory focus on greenwashing – where claims are exaggerated or unsupported – has increased.
Inaccurate or misleading ESG disclosures can result in regulatory penalties, reputational damage, and professional indemnity claims.
Lockton’s guidance noted that membership in ESG or climate alliances should be supported by measurable actions and transparent, auditable data.
Australia’s climate disclosure regime is designed to align with international standards, such as those set by the International Sustainability Standards Board (ISSB).
Non-compliance may affect access to capital, insurance renewals, and participation in global supply chains.
Australia has seen a rise in climate-related litigation, with a high per capita rate of cases.
Lockton noted that legal actions have increased across all states, especially in areas with significant resource industries.
Recent enforcement by the Australian Securities and Investments Commission (ASIC) has targeted greenwashing, resulting in substantial penalties for several financial institutions.
The insurance sector has responded to the evolving regulatory landscape by reinforcing climate commitments.
According to the Insurance Council of Australia, 85% of insurers have pledged to achieve net-zero emissions by 2050, and half aim for operational net-zero by 2030.
More than half have incorporated climate metrics into executive compensation.
A recent survey by Workiva Inc. found that most Australian executives intend to continue reporting greenhouse gas emissions, regardless of political developments.
This trend reflects a broader shift toward embedding climate accountability within corporate governance and risk management practices.
