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RIAA supports the establishment of External Reporting Australia (ERA) through the amalgamation of the Australian Accounting Standards Board (AASB), AUASB, and FRC. This reform represents a significant step toward a more integrated and internationally aligned financial reporting system.

RIAA commends Treasury for the amendments made since the first consultation including the provisions which have provided clarity on responsibility and ensures that standard setting for sustainability is protected by the primary legislation.

For RIAA, the successful implementation of ERA with strong governance will provide Australia with a regulatory structure that can better navigate complex and rapid progress in sustainability standards. This amalgamation is timely: the International Sustainability Standards Board (ISSB) recently announced that it has commenced a standard-setting process on nature-related risks and opportunities (drawing on the resources created by the Taskforce on Nature-related Financial Disclosures (TNFD), for which RIAA is the Australasian Consultation Group Convenor) and plans to to introduce incremental disclosure requirements on nature-related risks and opportunities not already explicitly reflected in IFRSS1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.

In our view, a single body that oversees financial and sustainability reporting will be better able to ensure more consistent development and connection between standards, the flexibility to set further sustainability standards and potentially better-enable integrated reporting. However, this can only be achieved with the amalgamated body (External Reporting Australia – ERA) having adequate resources to ensure it is able to deliver its mandate and deliver intended benefits. This reform should not be treated as a cost-saving measure; sufficient funding is essential for robust governance, technical capacity, and stakeholder engagement. Additionally, effective sustainability reporting and international engagement require specialised expertise, technology infrastructure, and ongoing consultation processes, all of which call for appropriate operational investment.

In preparing this submission, RIAA has been informed by its previous submissions to the first Treasury consultation on mandating climate-related disclosures (February 2023) and on the policy settings for this amalgamation (February 2025). RIAA also supports the submissions to this consultation by the Australian Council of Superannuation Investors (ACSI).

General recommendations

Mandate active international engagement

Australia was among the first jurisdictions to adopt the disclosure standards published by the ISSB. This early adoption positions Australia as a leader in sustainability reporting and provides an opportunity to influence global developments. However, past experiences with ISSB and AASB processes highlighted gaps in engagement at the outset of developing global standards. Ensuring active international involvement will help maintain alignment with global best practice and avoid duplication or divergence that could increase complexity for Australian entities.

RIAA strongly recommends that the new ERA, and consequently, the standard-setting boards, have a clear and explicit mandate for active participation in international standard-setting processes. This should include representation in global forums, collaboration with international bodies, and proactive engagement in shaping emerging global standards.

At present, the draft legislation does not explicitly require this function of the ERA (in s225A(1)(e)) to be included in the determination for the standard-setting boards (SSBs): s229B only requires s225A(1)(a)-(d) to be default functions of the SSBs. RIAA submits that s229B(1) be amended to include this function, instead of leaving it to be included on discretion unders229B(1)(v).

International engagement for global standard setting is fundamental fora mature economy such as Australia to ensure alignment of global standards. International alignment of standards is critical for institutional investors who need high-quality, comprehensive and comparable information about companies to make decisions about where to direct capital to align with both financial and sustainability objectives. This alignment is also important to ensure Australia can continue to attract global capital and to ensure the continued competitiveness of key Australian industries into the future.

Safeguard independence of the Governance Council Chair

RIAA recommends that the draft legislation include specific provision for the Chair of the Governance Council to be independent. Independence should be embedded in the governance framework and supported by clear guardrails to prevent undue influence.

The Governance Council will play a critical role in setting the strategic direction for ERA, including oversight of technical standards development. While it does not undertake technical work, its influence on priorities and processes means that independence is essential for credibility and trust in Australia’s financial reporting system. The current proposal does not provide for an independent Chair, which creates a risk of political or industry capture.

Consultation and industry engagement will be paramount

RIAA notes that significant actions of the Minister and Governance Council (such as determinations from the Governing Council to SSBs, any intervention by the Governance Council in SSBs, and additional functions for the ERA from the Minister) are functional only via legislative instrument, which requires consultation and is disallowable by Senate. Consultation is a crucial mechanism to ensure transparency and good governance.

In addition, noting the ability of the Governing Council to make, formulate, vary or revoke a particular standard by a SSB after complying with the requirements of s232D(4) of the draft legislation, RIAA submits that the explanatory memorandum should further explain the nature of this power, including that the limitations placed upon it and clarify the expectation that it would be used in relation to concerns around process – that is, the Governance Council should not be exercising this power to intervene in technical matters of standards or decisions by SSBs.

Clarify audit responsibilities for sustainability assurance

RIAA recommends clarifying the responsibility for auditing sustainability assurance within the broader financial reporting framework in the explanatory memorandum to the final bill. Sustainability reporting is placed firmly within financial reporting, recognising the importance to enterprise value of risks and opportunities arising from environmental, social and governance (ESG) issues.

RIAA submits that auditing of sustainability disclosures should be retained by the Auditing Board Auditing of sustainability disclosures should remain aligned with existing financial reporting audit processes rather than being shifted to a separate sustainability board. Noting that the draft legislation allows for two or more standard-setting boards to act jointly in the performance of functions or exercise of powers (s229B(2)), RIAA expects the sustainability standards board to play a crucial role in advising the auditing and assurance standards board on matters relating to sustainability assurance.