The First Wave of AASB S2 Reporting: Insights from Investors and Corporate Managers

The First Wave of AASB S2 Reporting: Insights from Investors and Corporate Managers

AASB S2 – Australia’s new mandatory climate-related disclosure standard – is changing how companies think about climate risk. But early interviews with corporate managers and investors suggest the standard is being understood in several different ways.

For corporate managers, AASB S2 is first and foremost a major governance and reporting change. Mandatory disclosure has pushed climate issues beyond sustainability teams and into finance, risk, operations, executive management and board oversight. Several managers described a clear increase in internal rigour, driven partly by directors’ responsibilities and the need to produce information that can withstand scrutiny of a mandatory reporting regime.

One manager explained:

…the regulatory requirements associated with it [AASB S2], it has put a lot more rigour around what we do internally, the capability uplift across the business...the level of director liability that's associated with it, which puts a very top-down emphasis.

That does not mean companies are already treating AASB S2 as a fully integrated strategic tool. Most appear to be approaching the first reporting cycle cautiously, with a strong compliance focus. One adviser predicted “some very boring reports for the first few years” as companies concentrate on meeting the requirements. However, this should not be viewed as failure. For many organisations, the first challenge is simply to build the systems, data, controls and internal capabilities needed to report credibly.

The Key Challenges Companies Continue to Face

The technical difficulties are substantial. Managers highlighted problems in quantifying climate risks in financial terms, including:

  • estimating physical risks
  • collecting reliable Scope 3 emissions data
  • assessing long-term impacts when policy settings remain uncertain.

Translating scenario analysis into anticipated financial effects is particularly difficult because it requires assumptions that are open to challenge. Companies are also wary of disclosing numbers that may be insufficient or unreliable.

There is also a matter of resourcing and capacity. Preparing these reports requires significant time, specialist expertise and cross-functional coordination. Some interviewees warned that reporting demands can draw budgets away from initiatives aimed directly at improving sustainability performance. That tension does not undermine the case for disclosure, but it does show why the quality and usefulness of the information produced matters.

Diverse Investor Perspectives on Climate Disclosure

Investor views are more mixed than the policy logic behind AASB S2 might imply.

Some institutional investors, especially large superannuation funds, have long pushed for better climate information and actively use it in engagement and investment processes. For them, more consistent and comparable disclosure can strengthen risk assessment and accountability.

Other investors are less convinced. One asset manager described climate information as “very much a low priority” in investment decision-making. Another interviewee argued that climate risk can be important without necessarily becoming a decisive investment input. Corporate managers also reported limited pressure from some investors to go beyond minimum regulatory requirements.

This divergence is important. AASB S2 is intended to produce decision-useful information for investors, but “investors” are not a single group with uniform needs. If users do not clearly communicate what information they value, companies may devote substantial resources to producing disclosures that are borderline compliant but ultimately ineffective.

Navigating the Path from Compliance to Strategic Climate Integration

The early picture is neither one of success nor failure. AASB S2 is already improving internal discipline, governance and visibility around climate risk, but its longer-term value will depend on what happens next. Companies will need to move gradually from compliance towards strategic integration and better quantification. Investors, meanwhile, will need to engage more actively in defining what genuinely useful climate information looks like.

The standard can create the infrastructure for better climate accountability. Whether that infrastructure changes corporate decisions and capital allocation will depend on how both sides use it.

About the Authors:

Dr Jayanthi Kumarasiri is a Lecturer at RMIT University with expertise in climate change reporting and sustainability disclosures in Australia’s corporate sector, developed through extensive research on corporate accountability, management, and reporting.

Professor Chandana Alawattage is a Professor at the University of Glasgow and an internationally renowned scholar who has made significant contributions to accounting and accountability studies across corporate and non-governmental sectors.

27 August 2026

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27 August 2026

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