ASIC flags six compliance gaps in Australia's first mandatory sustainability reports

Australia’s corporate regulator has released its first formal review of mandatory climate disclosures, identifying six recurring compliance problems in early reports – and the financial services and insurance sector is among the industries already operating under the rules. The Australian Securities and Investments Commission (ASIC) published its findings May 18, drawing on a desktop review of reports lodged by Group 1 entities for the financial year ending Dec. 31, 2025. Group 1 covers the country’s largest companies and was first in line under the regime’s phased structure. By May 6, ASIC had received 259 sustainability reports for that period – 34 from listed entities and 225 from unlisted. Financial services and insurance ranked third among sectors represented, behind mining and construction. The June 30, 2026, reporting season is the next milestone, and ASIC said its observations are intended to help entities avoid the same problems before then.

Six problems ASIC identified

ASIC’s review focused on whether reports delivered information that was accurate, complete, and useful to readers under the Corporations Act 2001 and AASB S2 Climate-related Disclosures. Across the sample, the regulator noted more consistency than had been seen under the previous voluntary framework – but also found patterns of non-compliance.

• Disclaimers that undermine the report’s purpose: Some entities placed disclaimers in or near their sustainability reports telling readers not to rely on the content for investment decisions or disclaiming responsibility for its accuracy. ASIC said disclaimers of this kind are not permitted, as they work against the statutory purpose of Chapter 2M reporting.
• Ignoring prior weather-related losses: ASIC found cases where entities had previously reported – through financial statements or ASX disclosures – that their assets or operations had been financially affected by extreme weather. Those same entities then failed to identify comparable climate risks in their sustainability reports when examining short-, medium-, or long-term exposures. Under AASB S2, entities must draw on information about “past events, current conditions, and forecast future conditions” when assessing climate-related risks.
• Unexplained assumptions: Reports in the sample sometimes disclosed judgments or estimates without explaining why certain figures were presented the way they were – for example, how an entity decided to apply the proportionality provisions in AASB S2. ASIC said readers were effectively left to draw their own conclusions, and that entities need to be clearer about the basis for any forward-looking figures.
• Required information buried in voluntary content: Some entities included substantial additional climate-related material beyond what AASB S2 requires. Where mandatory disclosures were not clearly separated from voluntary ones, readers could not easily tell which information was material. ASIC said this creates a risk that required disclosures are effectively obscured and recommended index tables as one way to distinguish them.
• Cross-references that do not comply: Entities in some cases linked to websites or documents not published by the entity itself or referenced another report without specifying which section applied. AASB S2 limits cross-referencing to reports published by the same entity, available at the same time and on the same terms as the sustainability report, with the relevant section precisely identified.
• Regulatory emissions targets overlooked: Entities took different approaches to deciding whether they had a “climate-related target” requiring disclosure. ASIC noted the definition in AASB S2 covers not only targets that entities set for themselves but also those imposed by law or regulation – including obligations under the Safeguard Mechanism. Some entities did not appear to have applied this broader reading.

Read next: Australia’s first climate reports expose gap between board awareness and action

Free webinars scheduled ahead of July deadline

Two days after the compliance observations were released, ASIC and the Australian Accounting Standards Board (AASB) announced a series of webinars running through June. The sessions, to be delivered with the University of Technology Sydney (UTS), are aimed at companies that will come under the reporting rules for the first time from July 1, 2026 – smaller and mid-size entities in the planning or early preparation stages.

Three sessions are scheduled:

• June 16 covers climate science and physical risks.
• June 25 covers transition risks and opportunities.
• June 30 covers emissions accounting, scenario analysis, and governance.

Each runs from 12pm to 1pm AEST and includes a Q&A with ASIC and UTS. Registration is open on the ASIC website. ASIC has also published eight e-learning modules covering foundational concepts.

Read next: ASIC sets reporting priorities for 2026-27

Review to continue

ASIC’s examination of December 2025 reports is ongoing, with final findings due in the second half of 2026. The regulator said it may contact individual entities about their disclosures during that process. ASIC also confirmed it will take part in a federal government consultation on reducing the compliance burden of sustainability reporting while preserving its core requirements – a process announced in the recent budget. The six observations point to where ASIC’s attention is focused. With financial services and insurance already represented among early filers, and more entities entering the regime from July, the regulator’s guidance gives those preparing their first reports a clearer picture of what reviewers will be looking for.