A new era for ESG as federal opposition support for net zero evaporates

The Federal opposition party, led by Liberal leader Sussan Ley, has abandoned the net zero target, claiming high energy prices were impacting Australia’s competitiveness.

The Coalition’s step away from net zero comes at a time when corporate Australia gears up for mandatory climate-related financial disclosures, with Group 1 entities expected to report from 1 January 2026.

Corporate Australia has invested significantly on climate-related financial disclosures, with the aim of providing the investor community with greater transparency of the key climate and transition risks of their business operations.

Communicating this information through disclosures has become critically important in providing investors the confidence that businesses are taking practical measures to identify and limit climate and transition risks to their operations.

The recent decision by the Coalition to step away from  a net zero target has added a layer of uncertainty for business and the investor community

“Corporate Australia has expressed a strong commitment and engagement with Climate-related financial disclosures, and we broadly support the importance of decarbonising the economy, to future proof our industries and financial system,” Daniel Popovski said.

They warned that the policy shift could slow progress.

“We acknowledge the road to net zero won’t be easy but we can’t risk further uncertainty and delay on taking climate action.” Popovski said.

ESG has evolved driven by calls for more authentic action and disclosures

Boards are increasingly under pressure to integrate sustainability into business strategy, but challenges remain in turning targets  into meaningful action.

Mans Carlson Sweeney, head of ESG and co-portfolio manager at Ausbil Investment Management Limited, told Governance Institute of Australia that while awareness is growing, execution is still uneven.

“Boards are under increasing scrutiny from stakeholders, investors, and regulators,” Carlson Sweeney said.

“There is a recognition that sustainability is not just a compliance issue. It is about strategy, culture, and the long-term health of the organisation.”

He noted that translating ESG commitments into tangible decisions can be difficult.

“Boards are being asked to step up, but often the guidance is vague. What does it mean to truly integrate ESG into strategic decisions? That is where a lot of organisations struggle,” Carlson Sweeney said.

One key area is board-level accountability.

“Without clear accountability, sustainability efforts can become performative. Boards need to ensure they are genuinely driving change and embedding ESG into every layer of decision making,” he explained.

He also emphasised culture as critical to success. “You can have policies and targets, but if the culture does not align, progress will be limited. Organisations need to build capability and commitment across teams, not just at the boardroom level.”

Australia’s net zero transition will be challenging but opportunities remain

The net-zero transition will present its own shortcomings with continued short-term energy price spikes to affect price-sensitive industries. Government will need to tussle with policy challenges and winning back bipartisan support, as growing discontent emerges from affected communities.

However, Australia’s potential for renewable industries is anticipated to grow, and our net zero transition will be crucial for our long-term competitiveness.

“Australia plays a vital leadership role in the region and globally. We have comparative advantages for renewable industries that we have not yet fully seized. We should not be deterred by the short-term challenges and instead look at the long-term opportunities of a low carbon future,” Popovski said.

According to Carlson Sweeney, the pace of change in ESG is accelerating, and boards that fail to respond risk reputational and financial consequences.

“Investors, employees, and customers are all looking more closely at how organisations manage environmental, social, and governance issues. The pressure is real, and it is only going to increase,” he said.