A Turning Point for ESG: Policy whiplash and the risks of standing still

Australia has entered a new phase of ESG complexity — one shaped as much by political volatility as by regulatory reform. The Federal Opposition’s retreat from the national net zero target has triggered fresh uncertainty at precisely the moment corporate Australia is preparing to disclose climate-related risks under mandatory reporting frameworks.

It's a stark reminder: strategy built on shifting political stands is strategy built on risk. And for boards, risk has a long memory.

Policy Instability Meets Mandatory Disclosure

With Group 1 entities required to begin climate-related financial disclosures from 1 January 2026, organisations across the country are investing heavily in capability, systems, and internal governance. These reforms are designed to give investors clearer visibility of climate and transition risks, the kind of transparency markets now expect as standard.

The Opposition’s move away from net zero undermines that stability. As Daniel Popovski warns, the sudden shift risks adding friction to an already challenging transition. Businesses need long-term certainty to plan, invest, and decarbonise in line with global expectations.

Popovski’s message is blunt: the transition won’t be painless, but delay costs more than decisive action. Australia has lost ground before due to hesitation. It can’t afford to repeat the pattern.

Boards Under Pressure: ESG as strategy, not slogan

Across the market, ESG has evolved beyond performative commitments. Stakeholders are demanding authenticity, measurable progress, and visible accountability — from the board down.

Mans Carlson Sweeney, Ausbil Investment Management’s Head of ESG, captures the current mood: boards understand the stakes, but execution remains uneven. Regulatory pressure and stakeholder scrutiny are rising, yet many organisations still struggle to translate high-level commitments into hard decisions.

Three themes continue to shape boardrooms:

1. Accountability must sit at the top.

Without clear board-level ownership, ESG efforts risk becoming superficial. Responsibility needs to be embedded into governance structures, not treated as an annual reporting exercise.

2. Culture dictates success.

Policies and targets are meaningless without organisational capability and cultural alignment. ESG performance depends on behaviour — not just at the executive table, but across teams and operations.

3. Integration is non-negotiable.

ESG considerations must form part of strategic and operational decision-making. Vague guidance is no longer an excuse; investors expect clarity on how boards weigh climate, social, and governance risks alongside financial outcomes.

Australia’s Transition: Challenges Ahead, Opportunities Undiminished

Short-term pressures; particularly energy price volatility; will continue to test political will and community sentiment. Bipartisan support may be fractured for now, but the economic case for transition remains firm.

Australia holds a comparative advantage in renewable industries. Real leadership requires seizing it, not retreating from it. Popovski notes the global opportunity: Australia can be a regional leader, but only if it avoids becoming distracted by short-term discomfort.

Investors are already signalling where the future lies. As Carlson Sweeney points out, scrutiny is intensifying across all stakeholder groups. Boards that fail to respond are exposed to real financial and reputational consequences.

The Bottom Line for Boards

The ESG landscape is accelerating whether politics keeps pace or not. For directors and executives, the mandate is clear:

• Build certainty inside your organisation even when external certainty falters.

• Treat sustainability as strategic architecture, not compliance décor.

• Strengthen accountability, capability, and culture now, not later.

• Use disclosure obligations to drive better decisions, not simply better reporting.

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Australia’s transition will not be linear, but it will be defining. The organisations that act with clarity and conviction will be the ones that shape, and benefit from, the next era of competitiveness.