What does AASB S2 compliance cost?

There are three separate costs and conflating them is why quotes look incomparable: preparation of the report, assurance as a separate engagement with a separate provider, and your own internal time. Preparation cost moves on the number of entities and sites, whether Scope 3 is in scope, and how retrievable your activity data already is. Assurance cost moves mostly on the quality of your working papers.

Should we use a consultant, software, or do it in-house?

They solve different parts of the problem and most first-year reporters need more than one. Software produces numbers, consultants produce judgements and documents, and in-house produces control while carrying the risk. The deciding question is which option leaves you holding a complete assurance file at the end.

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.

Glossary›AASB S2 disclosure requirements / AASB S2 mechanics›Climate resilience assessment

Glossary term

Cluster C · C22

Tier 1 · differentiator

Climate resilience assessment

Definition

A climate resilience assessment is the entity’s evaluation of whether its strategy and business model can withstand and adapt to climate-related changes, developments and uncertainties. AASB S2 requires the assessment to be carried out using climate-related scenario analysis, with an approach commensurate with the entity’s circumstances, and requires disclosure of what the assessment concluded.

AASB S2

· paragraph 22, read with Appendix B paragraphs B1 to B18 ·

In force

On this page

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

Cluster

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

In practice

Resilience is the disclosure that most exposes whether climate has actually been considered by the business or only documented by a consultant.

The standard does not prescribe a fixed number of scenarios, and it does not name required temperature pathways. Paragraph 22 requires the entity to use climate-related scenario analysis “using an approach that is commensurate with the entity’s circumstances”, and Appendix B paragraphs B1 to B18 explain what commensurate means: it scales with the entity’s exposure to climate-related risks and opportunities, and with the skills, capabilities and resources available to it without undue cost or effort.

This is widely misreported. A great deal of Australian commentary states that AASB S2 mandates two scenarios, one at 1.5°C and one high-warming pathway. The standard does not say that. The only temperature figure in the scenario guidance appears in Appendix B paragraph B14 as an illustration, noting that if an entity can incorporate multiple carbon price pathways associated with a given outcome, “for example, a 1.5 degree Celsius outcome”, without undue cost or effort, that analysis is likely to strengthen its resilience assessment. That is an example of good practice, not a requirement.

Appendix B paragraph B15 goes further in the direction most preparers do not expect. Qualitative information, including scenario narratives, either alone or combined with quantitative data, can provide a reasonable and supportable basis for the assessment. A smaller entity with modest exposure is not obliged to commission quantitative modelling.

What paragraph 22 does require is the conclusion. The entity must disclose its assessment of its climate resilience as at the reporting date, the implications for its strategy and business model, the significant areas of uncertainty considered, and how and when the scenario analysis was carried out.

For a private business the most common failure is scope. A resilience assessment covering only physical risk to owned sites is incomplete: transition exposures run through customer demand, input costs, insurance availability, finance terms and regulatory obligations, and for many mid-market businesses that is where the exposure actually sits.

What the assurer does with it

Resilience sits inside the strategy disclosures, which ASSA 5010 paragraph 10(a)(ii) places within the year-one review scope by reference to AASB S2 subparagraphs 9(a), 10(a) and 10(b). It is therefore tested from the first report. Because the output is a judgement rather than a number, the assurer tests the process and the trail: which scenarios were used and where they were sourced, when the analysis was performed and whether it covers the reporting period, what assumptions were fed in, who performed it, who reviewed it, and whether the disclosed conclusion is consistent with the underlying work.

They accept a documented assessment using published reference scenarios with stated assumptions, proportionate to the entity’s circumstances, with a board or committee record of consideration. They reject a resilience statement with no scenario analysis behind it, an analysis performed in a prior year with no evidence of review, and a disclosed conclusion the underlying work does not support. Note what is not on the rejection list: a single-scenario or qualitative analysis is not automatically a finding, provided the entity can show why that approach is commensurate with its circumstances. The assurer’s question is proportionality, not headcount of scenarios.

The most common first-year finding is a resilience conclusion more confident than the analysis it rests on.

Commonly confused with

Scenario analysis itself, which is the technique. Resilience is the conclusion drawn from it. An entity that discloses the technique without the conclusion has answered half the requirement. Also confused with a physical risk screening exercise, which is one input to resilience rather than the whole of it.

Timing and relief

No Appendix C transitional relief applies to scenario analysis or the resilience assessment. The requirement applies in full from each entity’s first reporting period.