In Session 4, we explored what AASB S2 expects under the Risk Management pillar, what effective integration looks like, and how to move beyond weak disclosures.
Lochie and Alex walked attendees through how to identify, assess, prioritise, and monitor climate-related risks in a way that satisfies auditors—and builds organisational resilience. We also discussed how scenario analysis, risk matrices, and strong governance elevate disclosures from box-ticking to business-enabling.
Key Takeaways from Session 4: Strategy
- Climate Risks Aren’t Just Physical: Disclosures must address both physical risks (e.g., bushfires, sea level rise) and transition risks (e.g., new policies, market shifts).
- Focus on Process Over Precision: Auditors in Year 2 will prioritise evidence of a robust process over perfectly quantified risk metrics.
- Integration is Non-Negotiable: Risk processes must be embedded into your overall enterprise risk framework—not siloed within sustainability.
- Use Scenario Analysis Strategically: It’s not about predicting the future; it’s about preparing for multiple possible ones.
- Prioritisation Requires Materiality Lens: Only material, time-sensitive climate risks should land on your risk register.
- Strong Disclosures Are Specific: Avoid generic statements—use localised examples, quantified impacts, and show the "working out."
- Common Pitfalls to Avoid: Vague risk lists, siloed ownership, static processes, and absence of documentation will all fail assurance.
- Risk = Opportunity: Climate-related opportunities (like energy efficiency or brand reputation) must also be identified, assessed, and monitored.
A few interesting questions raised during the session:
- The challenge around a 4°C scenario is that there is no publications available documenting what that would look like? Information seems more obvious with the Paris-aligned scenarios?
- The speakers clarified that you are not required to disclose a 4°C scenario under AASB S2. The examples shown presented a gold standard.
- Can you explain what evidence you will need to show to demonstrate "undue cost and effort" with respect to providing qualitative vs quantitative information? \
- You're not expected to be doing original peer-reviewed research into climate risks that may not exist... it’s a matter of using reasonable judgement and what’s publicly available.
If you wish to access other resources, reach out to francesca.castro@netnada.com.au.
