What will our audit and risk committee ask us?

The same questions they ask about the financial report, applied to information the committee has never seen before. Expect them on capture and scope, where each number comes from and what controls sit over it, the significant judgements and materiality, who your assurance provider is and whether they are independent of the preparer, and what liability protection applies and until when. It works as a self-test: anything you cannot answer today is a work item.

What does the board have to sign?

The directors' declaration in the sustainability report. For financial years commencing between 1 January 2025 and 31 December 2027, directors declare they have taken reasonable steps to ensure the report complies with the Corporations Act. From financial years commencing 1 January 2028, they declare their opinion that it does comply.

Glossary›AASB S2 disclosure requirements / AASB S2 mechanics›Climate-related opportunities

Glossary term

Cluster C · C6

Tier 1 · differentiator

Climate-related opportunities

Definition

A climate-related opportunity is a potential positive effect arising from climate change for an entity, including opportunities created by efforts to mitigate and adapt to it. Examples include new low-carbon products, energy cost reduction, access to concessional finance and improved resource efficiency. AASB S2 requires opportunities to be disclosed alongside risks, not instead of them.

AASB S2

· paragraphs 3(b), 9 and 10, with the Appendix A definition ·

In force

On this page

In practice
What the assurer does with it
Commonly confused with
Sources
Related terms
Related questions

Cluster

C · AASB S2 disclosure requirements / AASB S2 mechanics, 25 terms

In practice

Opportunities are the half of AASB S2 that most first-year reports skip, and the omission is visible. The standard’s scope paragraph 3 lists physical risks, transition risks and “climate-related opportunities available to the entity” as three items of equal standing. Paragraph 10 then requires the entity to describe the opportunities that could reasonably be expected to affect its prospects, to specify the time horizon over which each could occur, and to explain how it defines short, medium and long term. Opportunities are threaded through the rest of the standard too: paragraph 13 asks where in the business model and value chain they are concentrated, paragraph 14 asks how the entity has responded to them in its strategy and decision-making, paragraph 22 requires the resilience assessment to take them into account, and paragraph 25(b) requires disclosure of the processes used to identify, assess, prioritise and monitor them.

The reason reports skip opportunities is cultural rather than technical. A climate file built by a risk function produces a risk register. Nobody in that process is asked what the business might gain.

For a private business, the gate is the same as for any other AASB S2 disclosure, and it is financial. An opportunity qualifies if it could reasonably be expected to affect cash flows, access to finance or cost of capital. That test rules out aspirational statements and rules in some genuinely commercial items a business may not have thought of as climate matters at all: a product line whose demand is growing because customers have their own Scope 3 targets, a tender advantage from being able to supply verified emissions data, lower energy cost from an efficiency programme already underway, a margin on waste-derived inputs, or a finance margin ratchet tied to sustainability performance.

The most useful internal question is not “what are our climate opportunities”. It is “which of the things already in our budget or strategy exist because of climate, decarbonisation or energy transition”. For most mid-market businesses the honest answer is several, and they are already quantified, because they are in the plan.

There is one asymmetry worth knowing. Paragraph 4 puts risks and opportunities that could not reasonably be expected to affect prospects outside the scope of the Standard entirely, and paragraph 19 and 20 relief from quantitative information about financial effects applies to opportunities on the same terms as risks. But there is no relief that permits an entity simply to omit opportunities. An entity that has genuinely identified none must say so, and that is a conspicuous statement.

What the assurer does with it

Opportunities sit inside the strategy disclosures at AASB S2 subparagraphs 9(a), 10(a) and 10(b), which ASSA 5010 paragraph 10(a)(ii) places inside the year-one review scope. They are therefore tested from the first report, at the same level as risks.

The assurer tests symmetry first, because it is the fastest diagnostic. They read the risk register and the opportunity disclosure together and look for imbalance: twenty risks and one opportunity usually means the identification process only looked one way, and the follow-up question is what the process was, not what the answer was. They then ask for the same evidence they would want for a risk: who identified the opportunity, on what information, over what horizon, and what the entity did about it.

They accept an opportunity that is specific, tied to an identified part of the business model or value chain, assigned a defined time horizon, and traceable to a board paper, budget line, capital plan or product decision made during the period. They reject a generic statement of intent with no business behind it, an opportunity disclosed with no time horizon when paragraph 10(c) requires one, an opportunity that appears in the sustainability report and nowhere in the financial planning it implies, and a list assembled by an adviser with no evidence management adopted it. The recurring first-year finding is an opportunity disclosure written as marketing copy, which fails not because it is optimistic but because there is no process record behind it.

Commonly confused with

Climate-related risks, which are the potential negative effects, and which are the only half most entities disclose properly. Also confused with a transition plan, which is the entity’s strategy for moving to a lower-carbon economy: a transition plan may create opportunities and may be how the entity captures them, but the plan is disclosed under paragraph 14(a)(iv) and the opportunity under paragraph 10.