Jackie Spiteri
Australia’s move toward mandatory climate-related disclosures marks a major shift in corporate accountability and transparency. At the centre of this transformation is AASB S2, the new Australian standard for climate-related financial disclosures, modelled on the International Sustainability Standards Board (ISSB) framework.
From financial periods beginning 1 January 2025, entities meeting specified thresholds known as “Group 1” reporters under AASB S2, will be required to publish mandatory climate-related financial disclosures
While the intent is clear, to create consistent, decision-useful information for investors and stakeholders, the path to implementation can be complex. Drawing on our recent experiences supporting clients across sectors, this article explores where AASB S2 has come from, why it matters for Australian organisations, and the practical steps to embed it effectively within governance, strategy, and reporting systems.
Whether you’re a Group 1 entity or preparing for upcoming phases, these insights are designed to help you convert regulatory obligation into effective climate-aware practice.
Where AASB S2 has Come From?
The journey to AASB S2 began with the Task Force on Climate-related Financial Disclosures (TCFD), established in 2015 by the Financial Stability Board (FSB). The TCFD introduced a globally recognised framework for disclosing climate-related financial risks and opportunities across four key pillars, governance, strategy, risk management, and metrics & targets. Its aim was to help investors and markets understand how climate change could affect corporate value.
Building on this foundation, the International Sustainability Standards Board (ISSB) was created in 2021 under the International Financial Reporting Standards (IFRS) Foundation. The ISSB consolidated multiple sustainability frameworks (including the TCFD and SASB) to establish a unified global baseline for sustainability-related disclosures. In June 2023, the ISSB issued its first two standards IFRS S1 (General Requirements for Sustainability-related Financial Disclosures) and IFRS S2 (Climate-related Disclosures).
Australia formally adopted these standards in July 2024, when the Australian Accounting Standards Board (AASB) released exposure drafts ED SR1 and ED SR2, which later became AASB S1 and AASB S2. The final standards were issued in late October 2024, with AASB S2 establishing mandatory climate-related financial disclosure requirements for Group 1 entities from 1 January 2025.
AASB S2 mirrors IFRS S2’s structure and intent, embedding the TCFD pillars and aligning Australia with the global direction on climate disclosure and sustainable finance.
Side Note: AASB S1 is focused on broader sustainability-related disclosures and remains voluntary for the time being.
Why AASB S2 Matters?
The introduction of AASB S2 signals a fundamental shift in how Australian companies manage and communicate climate-related risks and opportunities. It’s not just a compliance exercise, it’s about understanding how your organisation is exposed and building trust, transparency, and accountability in a rapidly changing business environment.
At its core, AASB S2 ensures that investors and stakeholders have access to consistent, decision-useful information on how climate change may impact an organisation’s performance, strategy, and resilience. This transparency helps capital flow toward businesses that are well-prepared for the transition to a low-carbon economy, while encouraging others to strengthen governance and risk management processes.
From a business perspective, AASB S2 matters because it integrates climate considerations into mainstream financial reporting, a critical step toward treating climate risk as financial risk. Organisations that act early not only reduce regulatory pressure but also enhance their market credibility, investor confidence, and strategic resilience.
For boards and executives, this represents both a challenge and an opportunity: a challenge to lift internal capability and data readiness, and an opportunity to embed climate governance as a cornerstone of long-term value creation.
HOW TO APPROACH AASB S2 IMPLEMENTATION
While AASB S2 sets a clear disclosure framework, implementation requires careful planning, capability building, and coordination across finance, risk, sustainability, and governance functions. Based on SESG’s experience supporting early adopters, a structured and phased approach delivers the strongest results.
AASB S2 isn’t just another reporting requirement, it’s a strategic framework for managing climate risk, driving accountability, and positioning your organisation for long-term resilience.
Establish strong governance and ownership.
AASB S2 disclosures sit at the intersection of sustainability and financial reporting. Start by clarifying accountability, typically under the Board and Audit & Risk Committee, and embedding oversight into existing governance structures. Assign clear roles for strategy, data, and disclosure preparation.
Assess climate risks, opportunities, and exposure.
Begin with a climate materiality assessment to identify key transition and physical risks, as well as emerging opportunities that could influence your business model, value chain, and long-term resilience. Combine this with climate scenario analysis to test exposure and vulnerability across critical business systems, under a range of climate pathways.
Build your data foundation.
AASB S2 requires robust, auditable data. Centralise emissions, energy, and climate risk information across Scopes 1, 2, and 3 using digital tools such as KubeNest to improve traceability, reduce manual errors, and align with assurance expectations.
Integrate findings into strategy and targets.
Use insights from your risk and scenario analysis to shape mitigation strategies, adaptation priorities, and measurable emissions reduction or resilience targets. Ensure these are linked to financial planning and capital allocation.
Disclose, review, and refine.
Treat your first disclosure as the foundation for continuous improvement. Review data quality, internal controls, and governance maturity annually. As capability grows, align reporting more closely with ISSB, CSRD, and Taskforce on Nature-related Financial Disclosures (TNFD) expectations.
WHO HAS TO REPORT UNDER AASB S2?
The Australian Government has adopted a phased approach to introducing mandatory climate-related financial disclosures, ensuring that larger, more capable entities lead the transition. Reporting requirements under AASB S2 will be rolled out in three groups, based primarily on entity size, public accountability, and greenhouse gas (GHG) emissions profile.
Group 1 entities, the first required to report, will apply AASB S2 for financial years beginning on or after 1 January 2025.
Groups 2 and 3 will follow in 2026 and 2027, with progressively lower thresholds to bring medium and smaller listed entities into scope.
In total, approximately 600–700 companies are expected to fall within Group 1, representing Australia’s largest and most systemically significant organisations. For these entities, AASB S2 compliance will form part of the annual financial report, subject to assurance over time.
| Group 1 | Group 2 | Group 3 | |
|---|---|---|---|
| Who: | Companies are required to report under Chapter 2M of the Corporations Act and that fulfils two of the three thresholds. Companies are required to report under Chapter 2M of the Corporations Act and are a ‘controlling corporation’ under the NGER Act and meet the NGER publication threshold. | ||
| Above NGERs publication threshold | NGERS Reporters | All other NGERs reporters | |
| Employees | >500 | >250 | >100 |
| Gross consolidated assets | $1 billion or more | $500 million or more | $25 million or more |
| Consolidated revenue | $500 million or more | $200 million or more | $50 million or more |
| When: | Jan 2025 onwards First report due after 30 June 2026 | Report from FY26 First report due after 30 June 2027 | Report from FY27 First report due after 30 June 2028 |
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Group 1
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Group 2
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Group 3
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|---|---|---|---|
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Who:
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Companies are required to report under Chapter 2M of the Corporations Act and that fulfils two of the three thresholds. Companies are required to report under Chapter 2M of the Corporations Act and are a ‘controlling corporation’ under the NGER Act and meet the NGER publication threshold.
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Above NGERs publication threshold
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NGERS Reporters
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All other NGERs reporters
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Employees
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>500
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>250
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>100
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Gross consolidated assets
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$1 billion or more
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$500 million or more
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$25 million or more
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|
Consolidated revenue
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$500 million or more
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$200 million or more
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$50 million or more
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|
When:
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Jan 2025 onwards First report due after 30 June 2026
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Report from FY26 First report due after 30 June 2027
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Report from FY27 First report due after 30 June 2028
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Conclusions
The introduction of AASB S2 marks a defining moment in Australia’s transition toward transparent, climate-aligned financial reporting. While the standard brings new complexity, it also offers an opportunity for organisations to strengthen governance, improve resilience, and demonstrate leadership in managing climate risk.
At SESG, we’ve worked alongside early adopters to translate regulatory requirements into practical action, from climate risk assessments and scenario analysis to data system design and disclosure alignment. Our insights show that readiness isn’t just about compliance; it’s about building lasting capability that supports strategic, climate-aware decision-making.
If your organisation is preparing for AASB S2, we can help you navigate each stage, from gap analysis to implementation and assurance readiness.
Connect with the SESG team to explore how we can support your AASB S2 journey with pragmatic, experience-based solutions.