Climate reporting is now a financial issue: What accountants must know

Australia’s recently announced 2035 emissions reduction target of a 62–70 per cent reduction in greenhouse gas emissions marks a decisive acceleration in the transition to a low-carbon economy. Combined with the introduction of mandatory climate reporting under AASB S2 Climate-related Financial Disclosures, accountants now find themselves at the centre of a regulatory and strategic shift. Auditors are watching closely.

Why this matters for accountants

Australia’s new mandatory climate reporting regime, AASB S2, brings climate-related disclosures into the mainstream. For accountants, this means climate reporting is no longer a niche and voluntary environmental or ESG topic – it’s now a regulatory requirement that directly intersects with financial statements, governance, and risk management.

At Pangolin Associates, where we work across statutory reporting, carbon accounting, and auditing, we are seeing firsthand through our work with entities in their first year of climate reporting how accountants are grappling with climate reporting for the first time. Unlike traditional financial reporting, climate risk disclosures require cross-functional data collection and the integration of both forward-looking financial and non-financial analysis. This must be done within new and often complex business contexts, whether public or private, such as healthcare, manufacturing, mining, or professional services.

The challenge is turning complex climate-related information into structured, auditable reports that are credible, decision-useful, and ready for assurance. Since these disclosures are now subject to audit, accountants must ensure that climate data – from emissions baselines to scenario analysis – can meet the same scrutiny as financial figures.

This means applying traditional financial skills in new ways: interpreting forward-looking metrics, incorporating operational and environmental insights, and preparing disclosures that reflect both financial and non-financial realities. While this is unfamiliar ground for many accountants, it is quickly becoming a core part of the profession. Where this expertise is not available in-house, organisations can engage an Auditor’s expert to provide specialist guidance and support for assurance

The use of auditor experts

To meet the assurance expectations of AASB S2, auditors are increasingly engaging climate specialists to provide expert guidance under ASA 620: Using the Work of an Auditor’s Expert. Pangolin Associates is actively working with several accounting firms in this capacity, offering climate-related expertise to support auditors in evaluating the accuracy, completeness, and credibility of climate disclosures.

Our role may include:

• Verifying emissions baselines, targets, and scenario analyses.
• Providing specialist insight on the integration of climate risks and opportunities into financial statements.
• Supporting auditors in interpreting complex regulatory guidance and sector-specific climate risks.

By leveraging this specialised expertise, organisations and auditors can navigate the broader landscape of climate-related risks and opportunities, ensuring that disclosures are not only accurate but also grounded in scientific relevance.

Climate risks and opportunities

Much of the climate reporting conversation focuses heavily on risks – whether physical risks from extreme weather or transition risks such as regulatory changes, carbon pricing, and shifting market expectations. The Australian government’s recent release of the first National Climate Risk Assessment (NCRA) is a valuable reference, helping both decision-makers and advisors understand the physical and economic impacts of climate change on businesses and communities.

While understanding these risks is critical, accountants are also well positioned to highlight the opportunities that come with a proactive approach to climate. From our experience at Pangolin Associates, we see the organisations that engage early with climate reporting often find strategic advantages, such as:

• Financing benefits: Early investment in decarbonisation can lower borrowing costs and attract stronger investor interest.
• Greater resilience: Analysing supply chain exposure helps organisations anticipate disruption and strengthen business continuity.
• Stronger market positioning: High-quality, transparent disclosures can open access to green finance and build stakeholder trust.

Importantly, auditors are also beginning to assess whether climate risks are properly reflected in key financial areas such as asset valuations, impairments, and going concern assumptions. As a result, gaps in climate reporting can quickly become audit risks.

Accountants are central to bridging climate insights with financial performance, helping reposition climate reporting not just as a compliance exercise, but as a tool for strategic decision-making.

Navigating the challenge

For many, the new reporting regime can feel extensive and overwhelming. Climate reporting demands new datasets, new systems, and new ways of thinking, all under regulatory timelines that are moving fast.

For both Group 1 and Group 2 entities, mandatory climate reporting is approaching, with Group 1 entities required to report for their first year starting 1 July 2025, and Group 2 entities for the year starting 1 July 2026 under the new ASRS legislative framework.

Many Group 2 organisations, in particular, do not have dedicated sustainability teams, meaning the responsibility will often fall to finance and accounting leads. While this presents a challenge, it also creates a unique opportunity: accountants can play a central role in shaping how organisations prepare, respond, and integrate climate considerations into strategy, financial management, risk processes, and audit readiness.

Resources and capability building

For those looking to build understanding and confidence in this space, some useful resources include the AASB S2 Standard itself, the auditing standards ASSA 5000 and 5010, as well as the AICD directors' guide to MCR.

The message is unmistakable; climate reporting is here, it is mandatory, and it’s here to stay. Accountants who proactively embrace this change can do more than ensure compliance – they can become central to building organisational resilience and unlocking strategic opportunities for the decades ahead.

Manny Vassal is the principal, and Olivia Garvey is a consultant, at Pangolin Associates.