Sustainable development: Australia’s outlook in 2025

Australian businesses are facing complex, interconnected challenges in undertaking development projects. Key focus areas shaping the Australian policy landscape in 2025 will be around housing affordability, climate change and environmental conservation. However, with domestic and global regulatory pathways uncertain, businesses must be vigilant of rapidly evolving policy shifts.

State governments are continuing their push for higher-density housing as pressure mounts to address the shortage of affordable housing, with an objective to reconcile both social and environmental considerations. While the federal government’s environmental reforms face hurdles and delays, suspending progress on climate and sustainability goals at the national level, nature positive state government reforms are forging ahead. Simultaneously, the risk of climate litigation and regulatory scrutiny on corporate sustainability claims is intensifying.

This insight explores five anticipated developments in 2025 as Australian businesses and governments work to navigate these complex and interconnected challenges.

1. Housing affordability pressure continues

With affordable housing continuing to be a key issue, federal and state governments continue to pursue reforms to ease the housing pressure.

Federal housing reforms

The federal government has announced a number of housing reform policies in line with the National Housing Accord goal of delivering 1.2 million over the next five years. This includes a recent promise to provide a $10,000 bonus to apprentices who work in the residential housing sector. In 2024, the government launched the ‘Help to Buy’ program, offering shared equity loans for 40,000 low to middle income Australian households and legislated new tax breaks for developers to support the construction of build-to-rent homes. As part of its election campaign, the opposition announced a $5 billion Housing Infrastructure Program to fund essential infrastructure and facilitate the construction of 500,000 homes over five years.

New South Wales housing reforms

A number of reforms to planning regulations have been introduced to promote higher density housing, chiefly in areas adjacent to public transport in New South Wales. The ‘Transport Oriented Development’ (TOD) program has been introduced in stages, with changes being imposed in December 2024 to zoning, building height limits and floor space ratio restrictions for seven of the eight Tier 1 ‘Accelerated Precincts’ (at Hornsby, Macquarie Park, Kellyville, Bella Vista, Crows Nest, Bankstown and Homebush – with Five Dock to follow).

Further planning reforms were introduced in April 2024 to State Environmental Planning Policy (Housing) 2021 (NSW), which aim to deliver more housing through allowing mid-rise and mixed-use dwellings within a 400-metre radius of 37 identified train and metro stations (being Tier 2 of the TOD program). However, the industry response to Tier 2 has been limited to date, with few developments taking advantage of the reforms.

Both stages of the TOD program impose affordable housing targets, which may be as high as 18% affordable housing in perpetuity on certain Tier 1 sites. Additional reforms were introduced to allow for dual-occupancy dwellings in a wider range of areas. However, the proposed ‘mid-rise’ reforms to allow townhouses, terraces, and two storey apartment blocks near transport hubs and town centres have been delayed indefinitely.

In late 2024, the NSW Department of Planning, Housing and Infrastructure (DPHI) announced a number of new planning pathways to fast-track major housing development, including:

• the establishment of a new Housing Delivery Authority (HDA) to oversee selected approvals;
  
  
• a new state-led approvals pathway for major residential developments, aiming to cut assessment timeframes by up to 200 days; and
  
  
• a new DPHI-led rezoning process.

The HDA commenced on 8 January 2025, and within its first three weeks received expressions of interest from close to 100 proposals to deliver more than 40,000 homes. Despite these new initiatives, we anticipate challenges to the delivery of housing stock to persist for the near term due to high construction and financing costs, compliance with post-approval requirements and delays to processing residential development applications currently under consideration.

Victorian housing reforms

Significant reforms have also been introduced in Victoria, including a suite of consequential reforms to key real estate legislation, as well as the Planning and Environment Act 1987 (Vic) and the Victorian Civil and Administrative Tribunal Act 1998 (Vic). The three categories of reform target the rental market, real estate professionals, and planning and development controls and approval processes (including objections). These reforms improve renters' rights, increase the licensing, training and eligibility standards for real estate professionals and seek to streamline planning to encourage more and faster development.

Clearer controls and streamlined planning processes are being pursued to achieve the Victorian Government’s Housing Statement policy goals of facilitating in-fill development, subdivision, high-quality housing stock and transport-centred Activity Centres. This includes a range of ongoing work including a pilot program that is developing new controls for 10 new Activity Centres across Melbourne, a review of models to fund infrastructure, implementation of ‘ResCode’ reforms, and the imminent release of precinct structure plans for the eastern section of the Suburban Rail Loop (which the State has emphasised is both a transport and urban planning project).

Queensland housing reforms

The recently introduced Housing Availability and Affordability (Planning and Other Legislation) Amendment Act 2024 (Qld) has led to changes in the processing of state-facilitated development, including fast-tracked development applications for infill housing development that delivers diverse and affordable housing.

2. Commonwealth environmental law reform stalls while nature positive state reforms progress

In May 2024, the federal government introduced legislation to set out the second stage of its Nature Positive Plan. The proposed reforms followed the first stage of the Nature Positive Plan in late 2023, which set out a framework for an Australian Nature Repair Market and expanded the water trigger in the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) to include unconventional gas projects.

The second stage of the Nature Positive Plan proposed the creation of two new federal agencies, a federal environment protection agency (Environment Protection Australia) and Environment Information Australia.

For the third (and final) stage of the Nature Positive Plan, the federal government has proposed a wide range of reforms that will ‘overhaul’ the EPBC Act. A centrepiece of the Nature Positive Plan is the development of National Environmental Standards, which are intended to set clear outcomes for regulated activities under the new EPBC Act.

Despite the announcement of the second stage, the passage of the legislation through Parliament has stalled following an inquiry by the Senate, which put forward various recommendations including:

• further consultation on the definition of ‘nature positive’ to ensure consistency with Australia’s international commitments;
  
  
• further incorporation of First Nations’ traditional environmental knowledge; and
  
  
• deferral until the EPBC Act reforms are finalised.

The Commonwealth environmental law reform agenda will remain on-hold while political negotiations continue. The Prime Minister has recently stated that the legislation will not be progressed before the 2025 federal election, casting doubt on the second stage reforms currently before parliament, and whether the third stage reforms will ever be introduced.

Despite the challenges at the federal level, 2024 saw significant reforms to state-level biodiversity laws. In particular, in December 2024, the NSW Parliament passed amendments (which have yet to commence) to the Biodiversity Conservation Act 2016 (NSW) that focus on creating net positive biodiversity outcomes. Further information on the NSW Government’s biodiversity actions can be found in our previous insight, NSW plans for nature with net positive biodiversity offset reforms.

We expect to see continued pressure for nature positive outcomes, particularly in light of the proposed biodiversity financial disclosures framework set out by the Taskforce on Nature-related Financial Disclosures. This has already been adopted on a voluntary basis by 23 Australian organisations.

3. Changes to the energy mix

While renewable energy investment continues to gather pace globally, there will likely be a push for investment in a wider range of energy sources.

The US government has issued a range of executive orders and directives relating to climate and energy, including withdrawing from the Paris Climate Agreement, directing greater exploration of natural resources in Alaska and ordering a review of wind project permitting.

Meanwhile, Australia is gearing up for a further debate about nuclear energy during this year’s federal election campaign. In insights published last year, we considered the legislative framework in relation to nuclear energy and a regulatory roadmap for the possible introduction of a nuclear energy program. As the federal election approaches, we anticipate that there will be a continued focus on the potential to include nuclear energy as part of Australia’s future energy mix.

We also foresee a continued emphasis on renewable energy, transmission and storage projects in Australia. In New South Wales, in November 2024, the Energy Amendment (Long Duration Storage and Investment) Act 2024 (NSW) commenced. It focuses on building up long-duration storage in New South Wales, including by requiring the establishment of an additional 12-gigawatt hours of long-duration storage by 31 December 2033. Further, in March 2024, Victoria updated its renewable energy targets. The state now targets 65% renewable electricity generation by 2030 and 95% by 2035. Victoria's interim emissions reduction targets were also updated to mandate a reduction of 28-33% by 2025, 45–50% by 2030 and 75-80% by 2035 (compared to 2005 levels).

The NSW Government also designated six new renewable energy and transmission line programs as critical state significant infrastructure in 2024. It streamlined the planning pathways for those projects and granted planning approval for the HumeLink and Central West Orana Renewable Energy Zone. This signals a continued focus on the stable integration of renewable energy into the grid.

4. Climate litigation and regulatory enforcement risks continue to expand

Climate litigation progressed in 2024. Internationally, the most high-profile decision was the Hague Court of Appeal’s decision quashing a lower court’s order purporting to require a major petroleum industry company to reduce its absolute carbon emissions by 45% by 2030 relative to 2019 levels. However, it did not disturb the lower court’s findings that the Dutch Civil Code supported an obligation for companies to “limit CO2 emissions in order to counter dangerous climate change”. While there is no direct application of this finding under Australian law, we expect that high profile overseas litigation is likely to continue to encourage litigants to explore novel litigation strategies.

In 2024, ASIC successfully prosecuted the first greenwashing cases under the Australian Securities and Investments Commission Act 2001 (Cth). Misleading and deceptive conduct cases were brought against Mercer Superannuation and Vanguard, resulting in fines of $11.3 million and $12.9 million respectively. ASIC’s case against Mercer arose from its advertising of Sustainable Plus Options, which it alleged did not include investments in companies involved in carbon intensive fossil fuels. The case against Vanguard related to claims that securities in its Ethically Conscious Fund had been screened against ESG criteria, including in relation to fossil fuels. Both claims were found to be misleading. ASIC has also announced that greenwashing will be an enforcement priority for the third year running in 2025, making it unlikely that regulatory scrutiny of sustainability claims will diminish.

Private greenwashing litigation could also be a feature of the Australian legal landscape in 2025. For example, Parents for Climate’s greenwashing case against EnergyAustralia is set down for hearing in the Federal Court in May. Parents for Climate allege that various statements by EnergyAustralia relating to emissions from its ‘Go Neutral’ projects are misleading or deceptive. The claim will likely touch on the efficacy of avoidance credits, carbon capture and methane flaring as greenhouse gas offsetting mechanisms, making it one to watch, particularly for companies that advertise their use of carbon credits.

5. Sustainability disclosure requirements commence

On 1 January 2025, amendments to the Corporations Act 2001 (Cth) came into force, providing a phased introduction to mandatory climate-related financial disclosures (CRFD), commencing with the largest companies.

We have previously outlined the regime changes in insights Assessing your preparedness for mandatory climate-related financial disclosures and Climate-related financial disclosures: a new frontier for general counsel.

Of particular note, there is a three year transitional relief period preventing private litigation relating to certain statements (e.g. about scope 3 greenhouse gas emissions). However, the CRFD regime will increase the amount of publicly available information that could be subject to private suits, enforcement action by ASIC or shareholder pressure in the years ahead. Companies should be vigilant in ensuring all statements made in their sustainability reports can be adequately supported, regardless of the safe harbour provisions.

Looking ahead for planning and development in 2025

Reforms encouraging higher-density housing near transport hubs offer growth potential, along with the streamlining of various planning pathways to deliver housing Australia-wide. With these changes has come renewed energy around housing delivery, which will assist in meeting housing and affordability targets. However, considerable challenges related to infrastructure and developer contributions and ongoing approval delays and uncertainties still remain.

In addition, Australian businesses are facing uncertainty with the Commonwealth’s environmental reform approach unconfirmed, whilst some states press forward with their own nature positive reform agendas. Tightening climate policies, including the recently commenced mandatory climate related financial disclosures, and greenwashing risks, create opportunities for leadership in sustainability, but require a much greater focus on transparency and compliance. Biodiversity disclosures and the cost implications of a nature positive shift must also be at the forefront of sustainability considerations.

Contending with an uncertain, fast changing regulatory framework, new case law and increasing market pressures, businesses need to ensure that they are well informed on any new developments that will impact their approach to compliance and risk management.