Climate concern ‘leapfrogged’ by economic issues ahead of federal election

AICD’s Director Sentiment Index shows climate slipping as a short-term priority, though long-term focus remains.

The latest AICD Director Sentiment Index reveals that while climate change remains a key long-term issue, it has dropped down the short-term agenda.

Directors are increasingly focused on domestic economic conditions and regulatory obligations, with a third (33 per cent) citing the economy and 32 per cent identifying compliance burdens as the most pressing issues keeping them awake at night. In contrast, climate change has slipped in the short-term rankings, nominated by 10 per cent of directors as a key concern. Climate and sustainability reporting was mentioned by two per cent.

Energy policy has retained its prominence as a short-term priority that directors believe government should address, with 26 per cent recommending it – broadly consistent with the last federal election year. Conversely, climate change has more than halved as a short-term priority since the previous election in 2022, falling to 17 per cent from 39 per cent.

The longer-term picture is notably different. Over a 10-to-20-year horizon, directors remain attuned to climate risk, ranking climate change as the second most important issue for government to address (28 per cent), behind only productivity growth (30 per cent).

Climate being leapfrogged by more immediate concerns highlights the growing challenge of maintaining focus amid competing policy and economic demands.

In a further indication of shifting sentiment, the proportion of directors who ‘totally agree’ that climate change is a material risk for their organisation has declined from 46 per cent in 2022 to 39 per cent in 2025. The split between directors who agree and disagree is now evenly balanced, with both at 39 per cent.

When explicitly asked about the top issue government should address ahead of the election, six per cent nominated climate change and the environment – down from 13 per cent in the last election cycle. Economic management rose to 21 per cent, up from 14 per cent in 2022.

The DSI also explored directors’ views on the most important business and structural policy settings. In this context, there has been a significant decline in directors nominating climate. In the first half of 2022, 34 per cent identified climate as a key issue – compared to 13 per cent in the latest results.

AICD analysis

There’s quite a bit at play here. Long-term climate frameworks – such as mandatory climate reporting, the legislated 2030 target, and the bipartisan commitment to net zero by 2050 – are providing some clarity on the direction of travel. At the same time, climate is being overtaken in the short term as directors respond to more immediate pressures.

Nonetheless, long-term priorities still favour climate. Cost-of-living concerns have become the dominant issue for many organisations and the communities they serve – but directors recognise this does not make the climate challenge go away. Extreme weather events like Cyclone Alfred and record flooding in central Queensland are stark reminders of the risks.

The outcome of the forthcoming federal election also looms large, with the ALP previously indicating it will set a 2035 emissions target later in 2025 after the election, while the Coalition has dismissed the government’s 2030 target as unobtainable, and is focused on reaching net zero by 2050 using a broader mix of energy sources, including nuclear.

Meanwhile, in the not-for-profit (NFP) sector: Recognition remains, but climate implementation lags

Findings from the 2025 NFP Governance and Performance Study (NFP Study), released in March, indicate that climate continues to be recognised as a priority by many boards in the NFP sector. However, tangible action remains limited.

Two-thirds (65 per cent) of NFP director respondents in the study agreed their boards should prioritise climate – consistent with responses from NFP participants in the AICD’s Climate Governance Study 2024 a year earlier. However:

• more than half – 55 per cent – of the 2025 NFP Study respondents indicated their boards had taken no specific steps to strengthen climate governance;
• a quarter (24 per cent) had integrated climate into risk management processes (down from 30 per cent found in the broader climate study published in 2024);
• 18 per cent receive regular board reporting on climate (down from 25 per cent);
• 17 per cent have reconsidered strategy in light of climate risks (down from 27 per cent); and
• 13 per cent of NFP boards have undertaken climate-related director training, a decline from 20 per cent.

Despite these declines, climate confidence in the sector appears to be increasing. Thirteen per cent of NFP directors now strongly agree they have the knowledge to oversee climate risk – up from seven per cent.

AICD analysis

These insights into NFP director sentiment suggests a growing foundation for future action, though further investment in capability and board oversight will be critical.

In its Better regulation to unleash innovation and productivity in Australia’s boardrooms platform, released last week, the AICD reiterated its strong support for the climate-related financial disclosure regime that came into effect on 1 January 2025. However, it also reaffirmed its position that NFPs – along with all Group 3 entities (being smaller entities, see details here) – should be carved out of the mandatory reporting obligations.

This position recognises that NFPs do not have the same bandwidth for detailed climate reporting as corporates in Groups 1 and 2. This is consistently reflected across multiple AICD studies. The position aims to ensure the regime remains proportionate and targeted, avoiding undue compliance burdens on the NFP sector.