· Finity reviewed 26 of Australia’s first mandatory Sustainability Reports, finding the framework is driving climate risk analysis but cautious public disclosure
· 24 of 26 entities exceeded minimum scenario analysis requirements and 70% used three or more scenarios, yet the detailed findings rarely made it into public reports
· Five practical recommendations for Group 2 and Group 3 entities required to report in 2027 and 2028
Actuarial and analytics firm Finity has released new analysis of Australia’s first mandatory climate-related financial disclosures, finding that while Australia’s largest companies are making a concerted effort to meet the new reporting requirements, the first wave of reports reveals wide variation in how the framework is being interpreted and applied.
The report, Australia’s Mandatory Climate Disclosures: Insights from the First Sustainability Reports, draws on Finity’s review of 26 Year 1 Sustainability Reports from Group 1 entities with a 31 December reporting date, supplemented by Finity’s direct experience assisting multiple entities with their AASB S2 disclosures.
Sharanjit Paddam, Principal at Finity, said, “Reviewing these first reports has provided a real opportunity to understand how some of our largest corporations are interpreting and applying the detailed requirements of AASB S2. The analytical rigour is clearly there. What we expect to see develop over successive reporting cycles is greater confidence in translating that internal work into public disclosure. This is not a set-and-forget exercise, and Group 2 and Group 3 entities who treat it as a strategic planning tool rather than a compliance exercise will find it delivers value well beyond the report itself.”
Scenario analysis emerging as standard practice
24 of the 26 entities reviewed used climate scenario analysis to identify and assess climate-related risks and opportunities, even though AASB S2 does not require it. 70% included three or more scenarios against a mandatory minimum of two. More sophisticated entities went further, supplementing global reference scenarios with bespoke elements, including detailed third-party modelling of the physical and economic impacts of climate change on their specific asset base.
There is, however, large variation in how entities define long-term. AASB S2 requires time horizon definitions to be linked to strategic decision-making, yet Finity’s review found a wide range of interpretations. Around a quarter of entities adopted a long-term horizon of 10 to 15 years and some looked out to only five years. In the resources sector, four entities looked out 5 to 12 years while three looked out 25 years. Many physical climate risks are more likely to materialise over longer timeframes than strategic planning processes typically consider, a tension the framework has yet to resolve.
Limited quantitative disclosure, significant divergence on transition plans
There is a clear trend towards qualitative rather than quantitative disclosure of resilience and financial effects. While most entities performed quantitative analysis at a granular level, including by business unit and region, conclusions were often grouped up to an overall level before publication. Only a few attempted to link results to their financial statements, as AASB S2 directly requires. Of those that explained the omission, one cited commercial sensitivity and the other cited measurement uncertainty.
Transition plan disclosures were similarly mixed, with some entities scaling back emissions reduction commitments from earlier voluntary reporting, reflecting increased scrutiny on target-setting and greenwashing risks. Finity anticipates transition plan disclosure will quickly evolve, representing an excellent opportunity for entities to articulate their climate strategy and outline their ambition to support the decarbonisation of the economy.
Five recommendations for entities yet to report
Drawing on its review and years of experience assisting entities with climate risk management and disclosure, Finity has identified five practical steps for Group 2 and Group 3 entities preparing for their first disclosure.
- Start with governance: The governance pillar upholds every other element of the framework and gives the Board comfort that reasonable steps have been taken.
- Engage and socialise work early: Bring the Board and assurance providers into the process at least a year in advance so expectations are set and information can be critically reviewed before disclosure.
- Understand key decisions and judgements: Develop a clear understanding of the materiality tests required under AASB S2, including how results link to the risk management framework and financial statements.
- Learn from Group 1 disclosures: Select entities with similar circumstances as a benchmark for level of detail, structure and presentation.
- This is not a set-and-forget exercise: Preparing climate disclosures builds capability that compounds across successive reporting cycles and can be adapted to other strategic planning domains.
Finity has been working on climate assessments and disclosures for many years, supporting clients across all aspects of climate risk identification, assessment, management, strategy and disclosure. Its Climate Disclosures Hub brings together key resources to help organisations navigate mandatory climate disclosures. Visit finity.com.au/campaign/climate-disclosures-hub
About Finity
Finity is Australia’s largest actuarial and strategic analytics firm, working with large-scale organisations and government, through to tech start-ups across a range of industries, including insurance and banking. Finity is also the proud recipient of the Insurance Industry’s Professional Services Firm of the Year (2025) award.
Learn more: www.finity.com.au
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