Phased over four years, the rollout of a new climate risk disclosure framework will require the nation’s largest companies to begin reporting from 1 July 2025 under a new bill.

The Labor government’s Financial Market Infrastructure Bill was introduced to the lower house on Wednesday.

The heart of the reform is a new climate risk disclosure framework which, Treasurer Jim Chalmers said, will incentivise foreign investment while delivering on investor clarity.

The framework will cohere with international best practice by holding businesses to account over their climate-related financial disclosures.

Though the rollout will be phased over four years, Australia’s largest companies and financial institutions will be required to commence reporting from the financial year beginning 1 July 2025.

The size thresholds applied to the rollout take into account consolidated gross assets, revenue, and employee thresholds.

“After a decade of delay and denial under the coalition, we’re taking action on climate reporting to support more investment in cheaper and clearer energy and help companies and investors manage climate risks,” said Chalmers.

The Financial Market Infrastructure Bill will amend the ASIC and Corporations Act to ensure climate-related financial disclosures are subjected to similar assurance requirements as those applied to financial reports.

This will include a new requirement to consult with auditors and to disclose information about exposure to climate-related financial risks and opportunities.

Relevant companies will be required to produce a “sustainability report” as part of their existing annual financial reporting activities.

“Efforts to mitigate and adapt to climate change also present opportunities for entities: for example, opportunities to gain cost advantages over competitors through improved energy efficiency,” the legislation reads.

“Improved disclosure will help investors understand and finance these opportunities.”

The framework will support regulators in assessing and managing “systemic risks” to the financial system arising from climate change.

The government has referred to its approach as “climate first, but not only,” by striking a balance between climate action and business performance.

Among the first affected entities will be those with gross assets of $1 billion, revenues of $500 million, and 500 or more employees. These large entities will be required to commence reporting for the financial year beginning 1 July 2025.

Entities with gross assets of $500 million, revenues of $200 million, and 250 employees or more must report from 1 July 2026.

Smaller entities will not be affected by the changes unless they are “significant” greenhouse gas emitters, or they consume significant amounts of energy.

While the framework is largely consistent with international standards, certain modifications have been made to suit the Australian context.

For example, the standards incorporate existing national greenhouse gas emissions estimate methodologies and will reflect Australia’s unique climate change commitments.

The bill also includes reforms to the regulation of Australia’s critical financial market infrastructure. These changes are separate to the climate reforms, although exist under the same legislation.

Central to this aspect of the bill is a new RBA power to intervene and “quickly resolve” crises affecting critical financial market infrastructure.

This new power, along with stronger ASIC regulatory powers, acts on recommendations from the Council of Financial Regulators.