The evolution of climate resilience requirements in Australia has been marked by a tightening of regulations aimed at mitigating global warming impact. Initially, Australia's approach was modest, focusing on voluntary measures and industry-led initiatives. However, as the urgency of climate action became clear, the regulatory landscape shifted significantly. The introduction of the National Greenhouse and Energy Reporting (NGER) Act in 2007 marked a move towards mandatory reporting of greenhouse gas emissions. This was followed by the National Greenhouse Energy Reporting (Safeguard Mechanism) Rule 2015 that set the stage for ongoing climate commitments under international agreements like the 2015 Paris Agreement. Since 2023, two major climate resilience legislations have passed the Parliament.
The Safeguard Mechanism was reformed ‘to reduce emissions at Australia’s largest industrial facilities, help Australia meet its climate targets and ensure Australia remains competitive in a decarbonising world’ (Department of Climate Change, Energy, the Environment and Water).
The mandatory climate-related financial disclosures mandated through amendments to the Corporations Act 2001 and related legislation aim to ensure that businesses are transparent about the financial impacts of climate change on their operations.
The new legislations increase focus on emissions reduction strategies, climate change related risk management (physical and transitional), and disclosure, reflecting a comprehensive and evolving approach to addressing climate resilience.
The Safeguard Mechanism: A New Era of Accountability
The Safeguard Mechanism, initially introduced in 2015, has been revamped to impose stricter emissions targets on Australia's largest industrial facilities. These facilities, which emit over 100,000 tonnes of carbon dioxide equivalent annually, numbered 219 in the 2022–23 financial year. The mechanism mandates a decline rate to facilities’ emission baselines so that they are reduced predictably and gradually over time on a trajectory consistent with achieving Australia’s emissions reduction targets. This legislative shift, effective from 1 July 2023, underscores Australia's commitment to its climate goals.
Facilities exceeding their baselines must either abate emissions on site or purchase Australian carbon credit units. Additionally, those exceeding 30% reliance on carbon offsets must disclose their reasons for limited on-site progress. This mechanism not only enforces compliance but also encourages transparency and accountability in emissions reduction strategies.
The introduction of a carbon emission ‘trigger’ requires the Climate Change Minister to assess new or expanded projects against these targets, ensuring that mining operations are aligned with national objectives.
Mandatory Climate-Related Financial Disclosures: Transparency at the Forefront
Passed parliament in September 2024, companies preparing annual reports under the Corporations Act 2001 or with emissions reporting obligations under the NGER Act 2007 must disclose their climate-related risks and strategies.
This legislation categorises entities into three groups based on size and emissions: larger companies start disclosures from 1 January 2025, mid-sized companies from 1 July 2026, and smaller companies from 1 July 2027. This transparency ensures that investors are well-informed about the physical and transitional climate-related risks companies face, promoting accountability and strategic planning.
Australian companies operating abroad or seeking international finance must also consider international standards and best practices, further emphasising the global nature of these requirements.
How Will SRK Approach the Changes
Helping companies navigate these changes involves a comprehensive understanding of both transitional and physical climate threats and opportunities. We focus on equipping clients with the tools and insights needed to address these challenges effectively.
Our decarbonisation services address risks related to the transition to a lower carbon economy. We provide support to companies achieving decarbonisation targets while considering the long-term impact of mine closures on workers and communities.
When addressing physical risks, understanding climate change prediction is crucial. Our approach involves using advanced tools to process meteorological data, allowing us to offer detailed climate projections and risk assessments. This empowers clients to make informed decisions and implement effective adaptation measures.
Ultimately, our goal is to support clients in integrating these legislative requirements into their operations, ensuring both compliance and sustainability. Through collaboration and innovation, we strive to help the mining industry contribute positively to Australia's climate resilience objectives.
