Australia’s largest corporations have begun filing mandatory climate-related financial disclosures, but a new review suggests the results are far from uniform. Actuarial firm Finity examined 26 sustainability reports from Group 1 entities with a Dec. 31 reporting date – the first cohort required to report under the country’s phased disclosure regime – and found that the same framework is producing substantially different outputs depending on who is applying it.
The obligations stem from Chapter 2M of the Corporations Act 2001 and are governed by AASB S2 Climate-related Disclosures. Group 1 entities, which are the largest in scope, were required to prepare reports for financial years commencing on or after Jan. 1, 2025. Groups 2 and 3 will follow in subsequent years. Finity’s analysis was informed both by the reports themselves and by the firm’s direct involvement in helping several entities prepare their AASB S2 disclosures.
Nearly all entities reviewed – 24 out of 26 – conducted climate scenario analysis as part of their reporting, even though AASB S2 does not mandate it. Most went beyond the minimum requirement of two scenarios, with 70% using three or more. A smaller number built on standard global reference scenarios by commissioning third-party modelling specific to their own asset base and geographic exposure. Where the variation becomes more pronounced is in how entities define time horizons. AASB S2 ties horizon definitions to an entity’s strategic planning cycle, but Finity’s review found that companies are interpreting this in very different ways. Some treated five years as their long-term view. Others – particularly in the resources sector – extended their analysis out to 25 years, while four resources-sector entities used a range of five to 12 years. Sharanjit Paddam, principal at Finity, pointed to a structural tension in how the standard is currently written. “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,” Paddam said.
One of the more consistent patterns Finity identified is the gap between the depth of internal analysis and what ultimately appears in public disclosures. Most entities carried out detailed quantitative work, broken down by business unit and region, but chose to publish only high-level summaries. Few made any attempt to connect their climate risk findings to their financial statements – a connection that AASB S2 explicitly requires. Where entities acknowledged this gap, two explanations were offered: commercial sensitivity and uncertainty around how to measure and present the figures accurately.
The Australian Securities and Investments Commission (ASIC), which conducted its own desktop review of a sample of the first reports, flagged a related concern. In some cases, entities had not disclosed climate-related risks that were reasonably foreseeable given their operational history – including situations where the same assets had already been reported as financially affected by extreme weather in previous years. ASIC noted that the standard’s “reasonable and supportable” information threshold covers not just current conditions but also past events and forecast future conditions.
Transition plan disclosures showed the most notable retreat from prior practice. Finity found that some entities had wound back emissions reduction targets they had previously disclosed under voluntary reporting frameworks. The firm linked this to growing legal and reputational scrutiny around how climate targets are set and communicated. ASIC’s review also picked up inconsistencies in how entities are defining “climate-related targets” under AASB S2. The standard’s definition extends beyond voluntary goals to include any targets an entity must meet under law or regulation – such as obligations under the Safeguard Mechanism. Entities applied different approaches when deciding whether regulatory requirements constituted a reportable target. Paddam said the trajectory of transition plan disclosures bears watching. “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,” he said.
Paddam described the first reporting cycle as a starting point, not a ceiling. “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,” he said.
Finity laid out five steps for entities that have not yet reported. The first is to establish governance structures before addressing any other element of the framework on the basis that governance underpins everything else. The second is to bring boards and external assurance providers into the process early – at least a year ahead – so that expectations are aligned before any disclosures are finalised. The third is to develop a working understanding of the materiality tests under AASB S2 and how outputs connect to the risk management framework and financial statements. The fourth is to use Group 1 reports from comparable entities as a reference point for structure, detail, and presentation. The fifth is to treat the reporting process as cumulative rather than episodic. “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,” Paddam said.
ASIC said its review of Dec. 31, 2025, sustainability reports is ongoing, with final observations to be released in the second half of 2026 (H2 2026). The regulator also confirmed it will take part in the Australian government’s consultation on changes aimed at reducing reporting burden while preserving the core requirements of the sustainability disclosure framework. As of May 6, 2026, ASIC had received 259 sustainability reports for the financial year ending Dec. 31, 2025, with financial services and insurance among the five most represented sectors.
