In plain terms: IFRS S2 (Climate-related Disclosures) is an international standard that tells organisations how they should report the financial risks and opportunities caused by climate change (e.g. how severe weather, carbon regulation, or transition risks might impact cash flows, costs, assets). In Australia, this is being adopted as AASB S2, becoming a mandatory requirement for many private sector businesses.
What is AASB S2 (Australia’s version)
- AASB S2 is based on IFRS S2, but tailored for Australia’s legal and institutional context. (AASB)
- It focuses solely on climate-related disclosures (unlike a broader sustainability standard). (PwC)
- Key disclosure pillars:
- Governance – who is responsible, oversight, controls
- Strategy – how climate risks/opportunities affect your business model, value chain, transition plans
- Risk Management – how you identify, assess, manage climate risks
- Metrics & Targets – emissions (Scope 1, 2, and eventually Scope 3), targets, progress, scenario analysis (PwC)
- Australian tweaks:
- Some paragraphs from IFRS S1 (general sustainability disclosures) are integrated into Appendix D to make AASB S2 standalone. (standards.aasb.gov.au)
- Entities don’t have to disclose industry-based metrics as IFRS S2 might require. (PwC)
Who must comply & when
- The legal requirement comes through amendments to the Corporations Act 2001 under Treasury’s new climate disclosure regime. (KPMG)
- Reporting is phased by entity “groups”:
- As an example, companies with a 30 June year end in Group 1 must report climate disclosures in the 2025–26 financial year (i.e. for the full year from 1 July 2025 to 30 June 2026). (Anthesis)
What this means for private sector businesses
- Businesses in scope will need to build systems to track Scope 1 & 2 emissions, and over time Scope 3 (indirect) emissions.
- They’ll need to adopt scenario analysis, set climate-related targets, and disclose assumptions and uncertainties.
- Governance change: senior management and boards will need to oversee climate strategy and ensure accountability.
- Assurance (external audit) will be phased in over time (some disclosures may require limited or reasonable assurance in future). (KPMG)
- There is liability risk: misleading or false statements in climate disclosures could attract penalties under Corporations Act rules (similar to financial reporting rules). (KPMG)
- Private sector entities not yet covered (smaller firms) should begin preparing now — build capacity, do gap assessments, plan strategy.
High-level timeline & caveats
| Phase | Effective date | What to do / notes |
|---|---|---|
| Legislation passed & standards issued | 20 September 2024 (AASB) | AASB published the final S2, and the legal basis was reinforced by amendments to the Corporations Act. (PwC) |
| First reporting for Group 1 | From financial periods beginning 1 January 2025 (AASB) | Entities in Group 1 must prepare their first climate disclosures in the first full eligible financial year. |
| Later phases | 1 July 2026, 1 July 2027 for Groups 2 & 3 (AASB) | The rollout allows smaller or less emissions-intensive entities time to build capability. |
⚠ This timeline is based on current drafts and announcements — subject to legislative or regulatory change. Return to this site for updates and commentary as rules evolve.
What to read / official sources
- The AASB’s official text: AASB S2 Climate-related Disclosures (Sept 2024) (standards.aasb.gov.au)
- AASB’s FAQ & Knowledge Hub on S2 (AASB)
- KPMG overview of Australia’s legislative framework and mandatory climate disclosure regime (KPMG)
- EY illustrative examples & disclosure checklist for AASB S2 (ey.com)
