Key points:
- AASB S2 requires clear disclosure of how boards and management oversee climate-related risks and opportunities, reporting processes and decision-making.
- Boards are required to disclose how climate-related risks and opportunities are governed, including how responsibilities are allocated and how climate considerations are addressed within existing governance, strategy and risk management processes, and, where applicable, remuneration frameworks.
- Practical preparation should focus on clear delegation, capability building and the integration of climate considerations into core governance processes.
As Australia moves toward mandatory climate reporting under the Australian Sustainability Reporting Standards (ASRS), boards are expected to provide greater clarity on how climate‑related risks and opportunities are governed. AASB S2 goes beyond identifying who has oversight; it requires organisations to explain how that oversight operates in practice through existing board and management processes.
For most organisations, this is not about creating new governance structures, but about strengthening clarity, accountability, and consistency within current arrangements, and to document them clearly. AASB S2 is pushing Boards to move from implied accountability to demonstrated accountability.
ASIC Regulatory Guide 280
In March 2025 ASIC released Regulatory Guide 280. This guide highlights the important role directors play in approving sustainability reports and exercising their duties of care and diligence in relation to sustainability reporting. In doing so, directors are expected to:
- Have an understanding about the reporting entity’s sustainability reporting obligations;
- Have an understanding about climate-related risks or opportunities that could reasonably be expected to affect the reporting entity’s prospects;
- Require the establishing of systems that identify, assess and monitor any material financial risks and opportunities relating to climate;
- Require the establishing of controls, policies and procedures for overseeing, managing and preparing the sustainability report and for keeping sustainability records; and
- Apply a critical lens to the disclosures proposed in the sustainability report.
Directors may rely on experts and advisors, but remain responsible for making an independent assessment of information provided using their own skills and judgement.
Strengthening governance documentation for AASB S2
In meeting the governance‑pillar expectations and disclosure requirements of AASB S2, boards should focus on a number of core areas:
- Governance alignment
Boards should clearly allocate responsibility for overseeing climate‑related risks and opportunities, whether at full board level or through a committee. This allocation should be reflected in board and committee charters, management mandates, and role descriptions, with clear escalation pathways between management and the board. The focus is on ensuring accountability for climate oversight is unambiguous and embedded within existing governance and remuneration structures, where appropriate.
- Capability building
Boards should consider whether they have access to appropriate climate‑related skills and experience, or a plan to develop that capability over time. This includes assessing current board and management capability, addressing gaps through targeted training or external expertise, and ensuring climate knowledge is sufficient to support effective oversight. Capability considerations should align with broader board skills, succession planning, and governance priorities. - Integration into core governance processes
Climate‑related risks and opportunities should be integrated into established governance processes rather than managed as a standalone sustainability exercise. This includes incorporating climate considerations into strategy, enterprise risk management, capital allocation decisions, and performance frameworks, so they are assessed alongside other material risks and opportunities. - Documentation and evidence of oversight
Boards should ensure governance processes produce a clear record of how climate matters are considered and overseen. Board papers, management reporting, and meeting minutes should demonstrate how climate‑related risks and opportunities are identified, discussed, and factored into decisions. This documentation is critical in supporting accountability and alignment across financial reporting, risk management, and assurance processes.
Why this matters for boards
AASB S2 reflects an expectation that climate‑related risks are governed with the same discipline as other material financial and operational risks. Boards will be expected to show that climate oversight is clearly owned, appropriately delegated and integrated across strategy, risk, finance and remuneration.
For many organisations, the challenge will not be a lack of activity, but gaps in clarity, consistency, and documentation. Addressing these issues early supports the transition from implementation to business‑as‑usual climate governance.
Embedding governance over time
AASB S2 recognises that governance maturity develops over time. While documentation provides structure, effective governance is established through repeated application as roles are tested, reporting cycles mature, and climate considerations become part of routine decision‑making.
For smaller and mid‑sized organisations, starting with proportionate and practical steps are both acceptable and effective, provided there is clear ownership and a pathway toward more mature arrangements.
“The governance requirements of AASB S2 is less about getting everything perfect on day one, and more about embedding clear ownership and accountability so climate oversight becomes part of business‑as‑usual governance.”
Nathan Balban, BAA Audit Partner, GAICD.
AASB 2 Climate Governance – Board guide to mandatory climate reporting
To support boards in preparing for AASB S2, we have prepared a Board guide to mandatory climate reporting. The guide provides a snapshot of the key governance‑related disclosure requirements under AASB S2 and outlines practical actions boards can take to implement and document strong climate governance.
If you are in the process of preparing for mandatory climate reporting, and need advice on how to get started, we can support boards by providing guidance on AASB S2 governance expectations and advising on practical, proportionate approaches to strengthening climate oversight and accountability within existing governance frameworks.
