Barry Li | Climate Reporting & Assurance

Insights on climate reporting, carbon markets, and sustainability assurance.

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Barry Li

PhD candidate in Accounting and Finance at the University of Newcastle, Australia, researching climate reporting, carbon markets, and sustainability assurance. An auditing practitioner with over 10 years’ experience, sharing insights at the intersection of academia and practice.

    February 2026: Assurance Readiness, AASB S2 Amendments, and the Safeguard’s Credibility Test

    As we move through February 2026, Australia’s climate reporting landscape is shifting from preparation to implementation. Group 1 entities are now deep into their first mandatory reporting cycle, while Group 2 entities face a countdown to 1 July 2026. Meanwhile, two significant developments demand attention: the AASB’s December 2025 amendments that simplify emissions reporting, and the upcoming Safeguard Mechanism review that will test Australia’s industrial decarbonisation credibility.

    This post captures the key developments emerging in early 2026, focusing on assurance readiness, recent standard amendments, and the policy signals that practitioners and preparers should be tracking.

    The Deep Dive: Key Developments

    1. AASB S2025-1: Amendments That Simplify GHG Reporting

    Source: AASB S2025-1 Amendments to Greenhouse Gas Emissions Disclosures (December 2025)

    In December 2025, the AASB issued significant amendments to AASB S2 Climate-related Disclosures. Rather than adding complexity, these changes provide targeted relief for Australian organisations navigating their first mandatory reports.

    Key Amendments:

    • Scope 3 Category 15 (Financed Emissions): Organisations can now limit disclosure to financed emissions only, removing the need to include emissions from underwriting and investment banking activities. This is particularly relevant for insurance companies and commercial banks.
    • Industry Classification Flexibility: Entities are no longer required to use the Global Industry Classification Standard (GICS). Any classification system that best explains climate-related transition risks is now acceptable.
    • Jurisdictional Relief for NGER: Australian organisations can use NGER methods for Scope 1 and 2 emissions without conflicting with global standards.
    • Global Warming Potential (GWP) Relief: Organisations reporting under NGER can continue using Australian National Greenhouse Account Factors, even where based on older GWP figures.

    Practitioner Note: Amendments #3 and #4 confirm that compliance with NGER requirements satisfies AASB S2 without complex recalculations—a significant practical relief.

    2. Assurance Readiness: What Auditors Will Look For

    Source: BDO – Ensuring Your Mandatory Sustainability Report is Assurance-Ready (February 2026)

    The first year of mandatory reporting is a transition period. While full sustainability reports must be prepared, only selected parts will be subject to limited assurance in Year One. This phased approach provides time to develop systems and documentation before moving to full limited assurance in Years Two and Three.

    Auditor Focus Areas:

    • Governance: Board and management roles clearly defined; active committees dealing with climate matters; supporting documentation in place
    • Climate Risks & Opportunities: Clear identification and assessment process; evidence that assessments inform disclosures across all pillars
    • GHG Emissions (Scope 1 & 2): Documented boundary policy; comprehensive Basis of Preparation; activity data reconciled to general ledger

    Critical Insight: ASIC’s position is clear—if an activity, assessment or process is not documented, auditors should treat it as incomplete. The mantra: “Not documented, not done.”

    3. Safeguard Mechanism 2026: Australia’s Credibility Test

    Source: Energy Insights – Safeguard Mechanism 2026: Australia’s credibility test (February 2026)

    The Safeguard Mechanism (SGM) review scheduled for 2026–27 will be a defining moment for Australia’s industrial climate policy. With declining baselines biting harder and compliance demand rising, the review will determine whether the mechanism continues to drive genuine abatement or whether its impact plateaus.

    Key Tensions:

    • Baseline Decline Rates: The indicative post-2030 rate of 3.285% falls well short of what’s required. Independent analysis suggests annual declines of 4.8%–6.9% are needed to align with Australia’s 2035 ambition.
    • Facility Performance: Covered emissions fell only ~4.3% over two years, while exceedance volumes increased by more than 50%—indicating facilities are not decarbonising fast enough.
    • Offset Integrity: As baselines tighten, the scheme’s credibility becomes tied directly to ACCU supply and integrity—itself under review in 2026.

    Expert View: Tony Wood (Grattan Institute): “This will be an important test of the government’s commitment to meeting its targets.”

    4. GHG Protocol Releases Land Sector and Removals Standard

    Source: GHG Protocol – Land Sector and Removals Standard (30 January 2026)

    The GHG Protocol has released its first-ever global standard for corporate accounting of land-sector emissions and removals. Published 30 January 2026, the LSR Standard establishes how companies should account for:

    • GHG emissions from agricultural land use
    • CO₂ removals from land-based activities
    • Emerging carbon dioxide removal (CDR) technologies

    Key Details:

    • Effective Date: 1 January 2027
    • Review Date: 2030
    • Guidance Document: Expected Q2 2026

    Why This Matters: For Australian entities in mining, agriculture, land management, and natural resources, this standard will influence future disclosure expectations.

    Practical Takeaway: What to Do in February 2026

    For Group 1 Entities:

    • Review December 2025 AASB S2 amendments—they may simplify your GHG reporting
    • Ensure governance documentation is complete before year-end
    • Reconcile all Scope 1 and 2 activity data to your general ledger

    For Group 2 Entities (1 July 2026 start):

    • You have 4+ months—use them for a gap analysis against AASB S2
    • Start documenting climate risk and opportunity assessments now
    • Consider a “dry run” sustainability report in Q1–Q2

    For Assurance Practitioners:

    For Safeguard Facilities:

    • Monitor ACCU pricing and supply signals ahead of the 2026–27 review
    • Baseline decline rates for 2030–35 will be set by July 2027

    Sources

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