The government has set out its plan to give the Australian Accounting Standards Board power to set climate-related and other sustainability standards for financial reporting, in a draft bill released for consultation.  Treasury Laws Amendment (Measures for Consultation) Bill 2022: Sustainability Standards amends the ASIC Act to give the AASB power to align Australia’s reporting standards with global development in sustainability reporting. According to the explanatory memorandum accompany the draft bill, the change is designed to meet market demand for consistent international climate disclosure. The ASIC Act does not explicitly grant the AASB the power to formulate sustainability standards. The government’s view is that such a power is necessary to support its commitment to ensure entities provide consumers and investors with greater transparency and accountability in relation to their climate-related plans, financial risks and opportunities. The government’s intention is that the work of the AASB will be aligned with the standards being set by the International Sustainability Standards Board. Last year, the International Financial Reporting Standards Foundation established the ISSB, giving it the task of developing global standards for sustainability disclosures. The ISSB, in turn, is building on the work of the Task Force on Climate-Related Financial Disclosures. The bill gives the AASB power to modify an international sustainability standard if necessary to accommodate Australian law or in consideration of “the Australian institutional environment”. In addition to giving the AASB power to make sustainability standards, the draft bill gives the Auditing and Assurance Standards Board power to make auditing and assurance standards and it gives the Financial Reporting Council oversight of the process.  In March, the ISSB published its first proposed standards, covering governance, strategy, risk management and metrics and targets. The final versions are due by the end of the year. Governance disclosures are designed to allow investors and other stakeholders to understand the procedures and controls used to monitor and manage significant sustainability-related risks and opportunities. Disclosures on strategy would allow stakeholders to understanding how an entity is addressing sustainability-related risks and opportunities.  Risk management disclosures are designed to help understand an entity’s sustainability-related risk management processes and whether those processes are integrated into overall risk management processes. Metrics and targets disclosure standards are designed to show stakeholders how an entity measures, monitors and manages sustainability-related risks and opportunities.