Climate disclosure in Australia has moved from voluntary practice to legal obligation. Large entities must now prepare a sustainability report alongside their financial statements, disclosing climate-related risks under a new standard: AASB S2.
What is AASB S2?
AASB S2 is Australia’s mandatory climate reporting standard, developed by the Australian Accounting Standards Board (AASB). Its companion, AASB S1, remains voluntary. AASB S2 requires relevant entities to disclose climate-related risks and opportunities that could affect their cash flows, access to finance, or cost of capital. Both AASB S1 and S2 sit within the Australian Sustainability Reporting Standards (ASRS).
AASB S2 became mandatory under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024. It’s modelled on the ISSB’s IFRS S2, with Australian-specific rules on scenario analysis, assurance and director liability, so AASB S2 compliance doesn’t guarantee full ISSB compliance.
Which Group Are You In?
An entity must prepare a sustainability report if it lodges financial reports under Chapter 2M of the Corporations Act and meets at least one of three thresholds: entity size, NGER obligations, or asset value (for asset owners like superannuation entities and managed investment schemes). This applies to listed and unlisted entities alike.
Reporting is phased in across three groups, based on revenue, gross assets and employee numbers (two of three criteria triggers inclusion):
| Group | Revenue | Gross Assets | Employees | Also Includes | Reporting From |
| Group 1 | $500m+ | $1bn+ | 500+ | Relevant NGER reporters | FY from 1 January 2025 |
| Group 2 | $200m+ | $500m+ | 250+ | Remaining NGER reporters; super funds/schemes with $5bn+ assets | FY from 1 July 2026 |
| Group 3 | $50m+ | $25m+ | 100+ | Exemption statement available for entities with no material climate risks | FY from 1 July 2027 |
The 2026–27 Federal Budget proposed raising Group 3 thresholds but that is still subject to legislation.
What Does AASB S2 Require?
The Sustainability Report sits alongside your financial statements, directors’ report and auditor’s report. It must include a Climate Statement, supporting notes and a directors’ declaration.
Disclosures follow four pillars, aligned with the TCFD structure:
- Governance: board and management oversight of climate-related risks and opportunities.
- Strategy: effects on the entity’s strategy, business model and financial performance over time.
- Risk Management: processes to identify, assess and monitor climate-related risks.
- Metrics and Targets: quantitative data, including greenhouse gas emissions and climate-related targets.
Entities disclose Scope 1 and Scope 2 carbon emissions from their first reporting year, with material Scope 3 emissions mandatory from the second year. Financial institutions may limit certain Scope 3 categories to financed emissions, under AASB amendments issued in December 2025 (AASB S2 Knowledge Hub). The Growth Activist’s Carbon Accounting service builds a defensible, auditable emissions baseline across all three scopes.
Scenario analysis requires assessing exposure under two climate temperature increase pathways. A modified liability period applies to Scope 3, scenario analysis and transition plan disclosures, sitting under a narrower enforcement pathway while entities build reporting capability.
How to Prepare for AASB S2 Compliance
Meeting your reporting deadline starts well before your first disclosure is due. A clear preparation process helps you avoid last-minute scrambling and builds the systems and accountability your reporting will rely on going forward.
- Confirm which group you are in and the reporting period based on your revenue, assets and employee count.
- Audit your Scope 1 and 2 carbon emissions to find where the gaps sit.
- Review governance and risk processes to check they can support disclosures.
- Engage
- Engage assurance providers (auditors) early so data collection meets the required standard.
A structured gap analysis is the sensible starting point. Even businesses outside current thresholds are affected, as larger entities increasingly request carbon emissions from suppliers.
Turn Compliance Into Strategy
AASB S2 rewards businesses that treat it as more than a compliance exercise. Getting your group, governance and scenario analysis right early builds credibility that carries through every reporting period after.
The Growth Activists helps translate AASB S2 requirements into a practical, defensible reporting approach. If you need help navigating your AASB S2 obligations, get in touch with our team today.
