In a world where climate ambition is faltering, Australia appears poised to chart a different course. Anthony Albanese’s Labor government has secured a second term with an expanded majority – a rarity in contemporary politics and a rebuke to the climate retrenchment seen elsewhere. Environmental policy now returns to the forefront of Australia’s national conversation. Corporate Australia must recalibrate accordingly.
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Nature on the Balance Sheet
The parliamentary arithmetic of the new Senate all but guarantees stronger environmental action. Labor is on track to win 28 seats – up from 24 last term – allowing it to bypass independents and negotiate directly with the Greens. Corporate strategies premised on gradual policy implementation will need urgent reassessment.
In his first press conference after re-election, Prime Minister Albanese reaffirmed a commitment to environmental action, reviving plans for a Federal Environmental Protection Agency. Coupled with a strengthened Environment Protection and Biodiversity Conservation Act and the launch of the world’s first Nature Repair Market, this marks a fundamental shift in how natural capital is tracked, valued and regulated.
Mining and agribusiness leaders may soon face growing pressure to treat nature not as a free externality, but as a material business input. While this shift remains nascent, momentum is building. Companies may soon be expected to quantify and disclose their ecological impacts and dependencies, embedding them into strategy, risk management and reporting.
Treasurer Jim Chalmers’ pivot toward productivity reform signals that Labor’s environmental agenda will be tempered by pragmatism. Given the resources sector’s outsized role in budget repair, it remains well positioned to delay or dilute reforms. But the direction is clear: natural capital is shifting from the periphery to the core of strategic decision-making. This is not environmental policy as usual – it is structural reform in slow motion.
Climate Ambition Reprised
Climate action has entered a fallow period following the return of Donald Trump. Yet Australia appears unmoved by this shift. Albanese has vowed to press ahead despite the American retreat, framing clean energy as not just an environmental imperative but an enormous economic opportunity to reimagine Australia as a renewable energy superpower.
Labor’s expanded majority, alongside sustained support for climate-focused independents, reveals an electorate largely inoculated against the climate scepticism afflicting the United States. Labor now has the political capital to pursue deeper decarbonisation without significant electoral risk.
Indeed, Labor’s 43% emissions reduction target for 2030 appears modest. The Greens, who will hold the balance of power in the Senate, will press for greater ambition. Their proposals include targets as high as 75% by 2030, and while Labor won’t adopt such ambitious figures, an increase to 50-60% could enter discussions. Businesses should expect the government’s Safeguard Mechanism – which currently imposes emissions reduction obligations on major industrial polluters – to acquire sharper teeth.
Labor has political incentives, too. Climate policy serves as a wedge issue that exacerbates the Coalition’s ideological fractures. To return to power, the opposition must reconcile two increasingly divergent constituencies: climate-conscious urban voters it hopes to regain, and fossil-fuel-dependent regional communities it cannot afford to lose. No other issue has so consistently drained the political capital of Liberal leaders, claiming casualties on both left and right of the party.
This internal division makes it difficult for the Coalition to develop a detailed, science-aligned climate policy. While it remains formally committed to net zero by 2050, it continues to lack a credible roadmap. The nuclear proposal advanced by the Nationals has failed to gain electoral traction. Reclaiming support in urban and coastal electorates will likely require a new strategy – one that reconciles economic opportunity with emissions reduction in a way the party has so far struggled to articulate.
Mandatory Reporting Catches Companies Flat-footed
For corporate Australia, the electoral outcome removes any lingering ambiguity. The regime for mandatory climate reporting will proceed unchanged. Many firms have underinvested in their preparations, adopting a wait-and-see approach in the hope that a Coalition victory might roll back requirements for Group 2 and 3 entities and scope 3 emissions disclosures.
The result is a bifurcated corporate landscape. Leading firms are embedding climate risk into strategy and capital planning, while laggards face growing scrutiny from institutional investors. Capital markets have taken note. The cost of capital is rising for emissions-intensive companies without credible transition plans.
The real work now lies in transition planning, tracking scope 3 emissions, and adapting to a global electric economy powered mostly by renewables, with firming support from batteries and gas as a transitional fuel. A tougher Safeguard Mechanism is expected to tighten baselines, restrict offset use, and compel emitters to pursue genuine decarbonisation. Relying on offsets is set to become more expensive. Cutting emissions at source – as Telstra has done – is now the safer bet.
Vanity and COP31: A Second Catalyst for Climate Action
Australia’s impending selection to host COP31 in Adelaide in November 2026 – facing only a weak bid from Turkey – introduces another catalyst for climate action. When the UNFCCC announces its decision in June, Australian firms will face unprecedented international scrutiny as the nation takes centre stage in global climate diplomacy. Staged in partnership with Pacific Island nations, the summit offers a rare moment of geopolitical significance for Australia.
For Australia’s business and political elite, the prospect of hosting the world’s most consequential climate forum is a powerful motivator. Ministers and corporate leaders will be eager to avoid showcasing half-measures before an audience of 30,000 delegates and observers. Behind the inevitable grandstanding, many firms will use the 18-month runway to COP31 to fundamentally recalibrate their transition strategies. Even the most hard-headed executives tend to act when faced with the prospect of justifying their climate credentials to global peers. In this case, vanity may prove the unlikely handmaiden of virtue.
Conclusion
With America in retreat and Europe distracted by geopolitical crises, Australia finds itself in an unlikely position: potential climate vanguard. The nation long seen as the developed world’s most reluctant environmental actor may now be positioning itself as keeper of the flame. For Australian business, this presents a strategic inflection point.
The 2025 Federal Election may well be remembered as the moment Australia’s climate paradox began to resolve itself. A country that built its prosperity on coal and gas exports while enduring existential threats from bushfires, droughts, and bleaching coral reefs has long lived with cognitive dissonance. That tension now appears to be giving way to something more coherent.
This marks a reversal of the conventional wisdom that Australia would forever remain captive to its carbon-intensive economy. The contradiction – being both one of the world’s largest fossil fuel exporters and among its most climate-vulnerable nations – may finally be resolving itself. The great Australian climate pivot is underway, and there will be no going back.
We’d love to hear your thoughts – email luke@bwdstrategic.com or message him on LinkedIn if you’d like to continue the conversation.
About the Author
Luke Heilbuth is CEO of sustainability strategy consultancy BWD Strategic, and a former Australian diplomat.