In 2025, Australia continued to build and embed its climate and environmental policy settings. Mandatory climate reporting commenced, the government set a 2035 emissions reduction target, and Parliament passed long-awaited environmental law reforms in the final sitting week. At the same time, policy certainty has become harder to secure, with reduced bipartisanship adding complexity for business amid an increasingly unpredictable energy transition. Our feature article explores what the EPBC Act reforms mean in practice for directors.
View EPBC analysis
This is our final newsletter for the year. We wish you an enjoyable break, and share recommended reading to support your work into 2026.
Also in this newsletter:
- Climate reporting: New AICD–Mandala analysis on the reporting costs for Group 3 entities
- Australia's electricity roadmap: AEMO outlines an ‘optimal development path’ for the National
Electricity Market - Climate risk: Five key business risks identified in Australia’s National Climate Risk Assessment
- Policy: National Environmental Standards open for consultation; ASIC releases sustainability reporting guidance for smaller organisations; and other market updates
Environmental law reforms and what they mean for boards
The Australian Parliament has passed significant amendments to the Environment Protection and Biodiversity Conservation (EPBC) Act, aimed at strengthening environmental protections and improving planning and approvals. Some measures commence immediately, with others to follow after consultation.
Key changes include new statutory tests requiring decisions to not have unacceptable impact, align with National Environmental Standards, and pass a ‘net gain' test. A Streamlined Assessment Pathway will reduce approval timeframes but excludes fossil fuel projects. Penalties increase significantly to up to 10% of annual turnover or $825m, with new stop work order powers. The reforms also establish the National Environment Protection Agency (NEPA) for compliance and monitoring, and Environment Information Australia (EIA) for environmental data, alongside environmental offset reforms and revised landclearing exemptions.
We asked Peter Briggs (Partner, HSF Kramer) to unpack the reforms most relevant to directors. What the reforms mean for your board.
New economic research highlights need to re-assess Group 3 climate reporting threshold
The AICD engaged leading economics advisory firm Mandala Partners to assess the scale, cost and complexity of regulation across the Australian economy. The research finds strong evidence that federal regulation has become denser, more complex and increasingly costly – constraining productivity, investment and growth. Mandatory climate-related financial reporting was examined as a case study within this broader analysis.
Mandala’s modelling shows that lifting the thresholds for large proprietary companies and Group 3 climate reporting entities could deliver meaningful economic relief without undermining policy objectives.
Raising the revenue threshold from $50 million to $100 million and the assets threshold from $25 million to $50 million would remove around 1,500 medium-sized organisations from mandatory climate reporting obligations saving around $700 million over four years. Access the research.
AEMO releases draft electricity roadmap for consultation
The Australian Energy Market Operator (AEMO) has released the Draft 2026 Integrated System Plan (ISP) ahead of the final plan due in June 2026. Prepared under the National Electricity Rules, the ISP sets out AEMO’s ‘optimal development path’ for generation, storage and transmission in the National Electricity Market (NEM) to maintain reliability and security while meeting government energy and emissions policies to 2050. Electricity demand is expected to nearly double by 2050, driven by electrification, data centres and industrial change, while around two-thirds of remaining coal generation is projected to exit by 2035. Western Australia and the Northern Territory each have their own electricity system, not connected to the NEM.
The Draft ISP proposes a major expansion of renewable generation firmed by storage and backed by gas, alongside significant new transmission investment. Consumers are also expected to play an increasing role, with continued growth in rooftop solar, batteries and electric vehicles. AEMO has invited feedback on the Draft ISP as part of the consultation process.
Australia’s first National Climate Risk Assessment provides a nationally consistent picture of how climate risks are intensifying and interacting across the economy. The assessment, released in September 2025, shows climate driven risks are compounding and cascading across systems – affecting infrastructure, supply chains, labour markets, ecosystems and financial stability.
The assessment identifies five key climate risks for business:
- Pressure on climate-sensitive industries and labour, driven by extreme heat, naturalhazards and changing climate conditions
- Disruption to critical infrastructure and supply chains, with flow-on effects across the economy
- Growing risks to communities and financial systems that underpin business activity
- Degradation of ecosystems, threatening industries reliant on natural systems and services
- Risks of maladaptation, where poorly coordinated responses can create new or amplified risks elsewhere
Read the article, written by Vicki Manson, Head of the Australian Climate Service, which sets out these risks.
Summer catch-up: Our latest climateand nature governance guidance
This year, the AICD released a range of publications through the Climate Governance Initiative Australia, addressing many of the most pressing climate- and nature-related considerations for boards.
Our latest release, Nature Enters the Boardroom, developed with the University of Sydney Business School, is Australia’s first study of how boards are approaching nature-related governance. It offers practical insights on risks, oversight and integration with strategy.
Other 2025 resources include: Governing for Net Zero (with ACSI) which outlines how boards can oversee credible transition planning; a 2025 climate science snapshot with CSIRO to support directors better understand evolving physical and transition risks; and a Circular Economy Primer (with Accenture) that highlights opportunities for innovation and value creation.
The Directors’ Guide to Mandatory Climate Reporting – produced with MinterEllison and Deloitte – remains a key reference to support boards in meeting disclosure requirements.
Market developments update
Policy and regulation
- National environmental standards open for consultation: Following passage of the Environment Protection Reform Bills in November 2025, the Government has released draft National Environmental Standards for Matters of National Environmental Significance and Environmental Offsets. Public consultation is open until 30January 2026.
- More progress on emissions needed to meet targets: The Climate Change Authority finds national emissions reductions will need to double to 2030 and triple to 2035 to achieve Australia’s 62–70 per cent reduction target, requiring coordinated action across government, industry and communities.
- Sustainability reporting guidance for smaller organisations: ASIC has released the first sustainability reporting education modules to support smaller organisations preparing for new sustainability and climate-related reporting requirements. Developed with the Australian Accounting Standards Board, the eight-module program introduces the sustainability reporting framework, with PDF versions of the first three modules now available.
- National AI plan to set sustainability standards: The recently released National AI Plan will include the development of national data centre principles with states and territories, alongside sustainability expectations covering renewable energy sourcing and efficient cooling technologies.
- Latest emissions data show decrease in all sectors but transport: Australia’s emissions fell 2.2 per cent in the year to June 2025. Electricity, fugitive, industrial and agricultural emissions decreased, while transport emissions rose slightly, driven by increased diesel use and aviation activity.
Climate risk and resilience
- Australia outlines role as COP31 President: Australia has released a statement setting out its priorities as President of COP31, to be held in Türkiye in November 2026. The statement emphasises multilateral cooperation, implementation of existing commitments and practical pathways to emissions reduction and adaptation.
- IGCC releases board-focused research: The Investor Group on Climate Change has published two new reports, one examines board capability and the other assesses how organisations are considering climate risk and resilience.
- Actuaries Institute warns of underinvestment in climate adaptation: New research from the Actuaries Institute finds Australia is significantly underinvesting in climate adaptation. The report calls for better valuation of adaptation benefits, stronger national coordination and expanded financing options, including public–private approaches.
- Long-range marine heatwave forecasts now available: Developed by the Bureau of Meteorology in collaboration with CSIRO, the freely available forecasts aim to support improved planning and risk management for ocean dependent industries, communities and ecosystems.
- IPCC begins work on Seventh Assessment Report: The Intergovernmental Panel on Climate Change has begun drafting its Seventh Assessment Report, with more than 600 authors meeting in Paris. The report will be released in stages through to 2029.
- University of Sydney publishes TNFD disclosure, becoming the first university to release a nature-related financial disclosure aligned with the Taskforce on Nature-related Financial Disclosures (TNFD).
Energy transition and the economy
- Tomago energy deal: The Prime Minister has announced some details of a long-term energy arrangement with Rio Tinto and the NSW Governmentaimed at securing electricity supply and keeping the Tomago aluminium smelter operating beyond 2028.
- Trans-Tasman climate and economic collaboration: Australian and New Zealand Treasury Ministers have reaffirmed their commitment to closer trans-Tasman cooperation on climate and economic policy. The focus includes aligning approaches to transition finance, productivity and long-term economic resilience.
- Government consumer incentives face cost blowouts: The Government will increase funding for its battery subsidy scheme by $5 billion, after most of the $2.3 billion budget was exhausted in six months. According to reports in The Australian Financial Review, the Government is also considering scrapping the electric vehicle fringe benefits tax concession after its cost rose to $1.35 billion this financial year – well above initial estimates.
For the calendar
Climate Governance for Australian Directors (Online Short Course, next available March 2026): An interactive four week course designed to build director capability on climate governance,climate reporting and board oversight of transition planning.
Introduction to Climate Governance (Free for AICD member online module): Available anytime. A self-paced module providing an overview of directors’ duties, climate risks and opportunities.
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