Climate-related disclosures

Australian companies meeting two of these criteria will have to prepare climate-related disclosures:

- A$ 50+ million consolidated turnovers

- A$25+ million consolidated gross assets

- 100+ employees

Further details on the criteria and timeline are provided in Figure 1.

Australian subsidiaries won’t be allowed to lodge the consolidated group sustainability report. They will have to prepare and lodge their own sustainability report and climate statement in accordance with AASB S2 if they meet the thresholds detailed in Figure 1.

AASB S2 Climate-related Disclosures builds upon IFRS S2 with a few adaptations for Australia.

- As per the Bill introducing mandatory climate reporting, two climate scenarios shall be considered, including a high global warming scenario (2.5°C or higher) and a low global warming scenario (1.5°C above pre-industrial levels).

- Incorporates parts of AASB S1 in Appendix D to make AASB S2 a standalone mandatory standard.

Building upon the TCFD framework, the ISSB issued the IFRS Sustainability Disclosure Standards (SDS).

- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. It requires a company to disclose information about its governance, strategy and risk management, as well as metrics and targets, in relation to its sustainability‑related risks and opportunities.

- IFRS S2 Climate-related Disclosures. It extends the TFCD recommendations and requires companies to provide more granular information on their climate-related risks and opportunities.

For companies already disclosing in accordance with the TFCD recommendations, complying with AASB S2 requirements will require to provide more granular information. The IFRS website outlines that “the requirements in IFRS S2 integrate, and are consistent with, the TCFD’s four core recommendations and 11 recommended disclosures, with minor differences.”

The ISSB has prepared a detailed comparison table that highlights the differences.

Given the strong alignment between IFRS S2 and AASB S2, most of the differences highlighted by the ISSB apply (see detailed comparison table) and most relate to the need to provide more granular and detailed information. Then, there are also area of differences between IFRS S2 and AASB S2 that would need to be considered to transition from TCFD to AASB S2. For instance, AASB S2, in line with the Australian climate regulation, requires using two climate scenarios, including a high global warming scenario (2.5°C or higher) and a low global warming scenario (1.5°C above pre-industrial levels).

Beyond meeting compliance requirements, preparing a climate-related reporting may help:

- Directors ensure that they fulfill their fiduciary obligations regarding climate-related risks

- Seize business opportunities offered by the Green transition

- Enhance the climate resilience of the operations and supply chain

- Develop credible decarbonisation pathway

- Enhance brand reputation

No, legally you do not have to. However, your shareholders, customers and other stakeholders may expect your company to report (some) climate related disclosures. It is possible to prepare a voluntary climate report.

The Sustainability Accounting Standards Board (SASB) has developed 77 sector specific standards. These standards help companies identify sustainability-related risks and opportunities that are likely to be financially material for them and their peers working in the same industry. Following the merger between SASB and the IFRS Foundation, these standards are currently being revised.