Climate
Climate-related risks and broader sustainability issues are now a core focus for boards and businesses including the implications of such issues on their operations, strategy and future resilience. In Australia and New Zealand, climate-related disclosures are now mandatory for certain entities with many other jurisdictions currently considering mandatory adoption of climate and/or sustainability reporting. Investors and stakeholders are basing crucial business and investment decisions on climate-related disclosures and the connectivity of such disclosures to the audited financial statements.
Accountants are well-placed to advise and support organisations to better understand the implications of climate-related risks and opportunities, including their connection to the financial statements. It is important accountants support the implementation of mandatory climate-related disclosures through measurement, reporting, advice and assurance.
Key developments in climate-related disclosures
Find out more about key developments in climate-related disclosures.
Find out moreKey climate-related disclosure areas
Effects of climate related risks on financial statements
Climate-related risks and opportunities have financial implications on business and influence the decisions of investors. Disclosure of climate-related matters that outline effects on company value and associated risks provide an understanding for business to apply appropriate capital flows and investment decisions and the connectivity to financial statements.
AASB educational material - disclosing information about anticipated financial effects
Materiality
An entity is required to disclose material information about its climate-related risks and opportunities that could reasonably be expected to affect the entities prospects over the short-, medium-, and long-term. The Practical guidance on preparing for the ISSB’s sustainability disclosure standards: Getting started Materiality is below.
CA ANZ and Deloitte guide - ISSB materiality
Scenario analysis
Climate scenario analysis explores the impacts of material risks on a business under different futures. Typically, a climate scenario is linked to potential futures through temperatures. For example, 1.5°C above preindustrial levels.
Greenhouse gas (GHG) emissions
GHG emissions are gases in the atmosphere that trap heat, contributing to the greenhouse effect and climate change. Every business has GHG emissions, however, the levels vary. There are three main types of GHG emissions. Scope 1 emissions are direct emissions from owned or controlled sources and scope 2 GHG emissions are indirect emissions from the generation of purchased energy. Scope 3 GHG emissions refer to the indirect GHG emissions that occur across an entity’s value chain, both upstream and downstream, outside of their direct operations.
CA ANZ – Carbon Accounting FAQs
CA ANZ guide - understanding and navigating scope 3 emissions
AASB educational material – GHG emissions disclosure requirements applying AASB S2
Transition planning
A climate-related transition plan is a strategic, forward looking document that outlines how an entity plans to achieve its net zero GHG emissions reduction targets. View our Understanding Climate-Related Transition Planning: A Guide for Accountants for more information.
Sustainability Resource Centre
Resources to support you to advise and support critical business and investment decisions relating to sustainable business practices, sustainability reporting and assurance.
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