Australia's corporate regulator has found forward-looking climate disclosures remain the weakest part of the country's first year of mandatory sustainability reporting. However, the Australian Securities and Investments Commission (ASIC) also identified meaningful improvement in the quality of climate-related financial disclosures, a development insurance brokers will be watching as more of their commercial clients enter the regime.
ASIC reviewed a sample of 40 sustainability reports lodged for financial years ending December 31, 2025, detailing its findings in Report 839. ASIC commissioner Kate O'Rourke said statutory reporting had produced heightened transparency and "more meaningful engagement by entities with climate-related risks and opportunities" compared with reports lodged voluntarily before the regime took effect.
O'Rourke said the regulator saw examples of entities "adapting or updating existing governance and risk management processes" in response to the disclosure requirements.
ASIC identified room for improvement in forward-looking disclosures and those underpinned by assumptions or judgment, including aspects of strategy and metrics-and-targets reporting. To help entities address the gaps, the regulator outlined eight practical action items that build on early observations it published in May.
O'Rourke said ASIC expected further improvement as more information becomes available and entities gain experience with the framework. She said the regulator is also engaging with Treasury on reforms to improve the efficiency of climate-related disclosures while preserving core requirements.
Since the May observations, an additional 53 sustainability reports have been lodged by entities with Dec. 31, 2025 year-ends, bringing the cohort total to 312, ASIC said. In the 2026-27 financial year, the regulator will review a sample of reports lodged by Group 1 entities with June 30, 2026 year-ends and continue engaging with large audit firms on the assurance methodologies used for sustainability reports.
The findings arrive as insurers and brokers work through their own reporting obligations and the flow-on effects for underwriting. Financial services and insurance ranked third among sectors represented in ASIC's initial review sample, behind mining and construction, according to the regulator's earlier compliance observations reported by Insurance Business.
A separate benchmarking review by EY of 12 reports from Australian reinsurers, general insurers, life and health insurers and composite groups found that underwriting opportunities, such as new products or resilience-focused offerings, were less consistently reported than other climate-related disclosures. EY noted insurers provide early indications of the costs of climate risks already occurring in the economy, reflected in insurance pricing, which are then transferred through the economy as insurers pool, price and transfer risk through underwriting, claims management and reinsurance.
Consultancy ERM, in an analysis of 33 climate disclosures reported separately by Insurance Business, found about two-thirds of early reporters identified at least one climate risk as material to their business, but fewer than one-third set out quantified estimates of how those risks could affect earnings, balance sheets or cash flows. As a result, insurers and capital providers are receiving formal recognition of climate risk but limited consistent financial metrics for underwriting, risk modelling and investment decisions, ERM found. Where companies did quantify exposure, ERM estimated early filers reported between $2.5 billion and $4.5 billion in annualised climate-related financial risk.
