As Australia transitions to mandatory climate-related financial disclosures from 1 January 2025, Chartered Accountants must be equipped to interpret and apply the concept of materiality under the new standards. CA ANZ’s two-part guide—developed in collaboration with Deloitte—offers practical insights to help finance professionals prepare for reporting obligations under AASB S2 Climate-related Disclosures (mandatory) and AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information (voluntary).

Part 1: Definitions and Reporting Frameworks

The first guide introduces the concept of materiality as defined by AASB S2, which replicates the definition found in IFRS S2. Under AASB S2, entities must disclose climate-related risks and opportunities that could reasonably be expected to affect their prospects—defined as cash flows, access to finance, or cost of capital—over the short, medium, and long term.

Entities in Group 3 may state that they have no ‘material’ climate-related risks or opportunities but must substantiate this with adequate records and undergo assurance under the Corporations Act 2001.

Part 2: Identifying and Disclosing Material Climate-Related Risks and Opportunities

The second guide expands on the two-step process with practical guidance.

Connecting Climate Disclosures to Financial Reporting

While IFRS Accounting Standards do not explicitly reference climate risks, they require companies to consider uncertainties—including those from climate change—when material to investors. The IASB’s illustrative examples (to be published in October 2025) aim to clarify how climate-related risks should be reflected in financial statements.