What assurance applies to climate disclosures, and when?

What this means in practice

The phasing is relative to your group's first reporting year. Because mandatory reporting commences at different times for the three groups, Year 1 means a different calendar period for each.

This is the AUASB's table published on 29 January 2025

* Group 1 entities with years commencing 1 January to 30 June are subject to the Year 1 provisions twice, for example years commencing 1 January 2025 and 1 January 2026. Scope 3 reporting is required for years commencing 1 January 2026 to 30 June 2026 for these entities, so the assurance phasing repeats where the AASB S2 Scope 3 transition relief does not.

** For Group 3 entities, Year 4 is years commencing 1 July 2030 to 30 June 2031. From that point reasonable assurance is required by the Corporations Act for all mandatory climate disclosures.

*** A statement under section 296B that there are no material climate-related risks and opportunities is phased the same way as the Strategy risks and opportunities row.

**** Year 1 covers only subparagraphs 9(a), 10(a) and 10(b) of AASB S2.

Year 1 assurance covers only 3 subparagraphs. Year 1 limited assurance over Strategy is not the whole pillar. It covers only the climate-related risks and opportunities (CRROs) that could reasonably be expected to affect your prospects, the description of them, and whether each risk is physical or transition. It does not cover the time horizons, the business model and value chain disclosures, strategy and decision-making, financial effects, or the resilience assessment.

Limited and reasonable are different engagements, not different levels of effort. In a limited assurance engagement the practitioner assesses risk and designs procedures at the disclosure level, and concludes in the negative form: nothing has come to their attention causing them to believe the information is not prepared in accordance with the criteria. In a reasonable assurance engagement the work is at the assertion level for each disclosure and the practitioner gives a positive opinion. ASSA 5000 states plainly that the level of assurance obtained under limited assurance is substantially lower.

Unassured does not mean unread. Where the practitioner has obtained the rest of the annual report, ASSA 5000 requires the assurance report to state that their conclusion does not cover that other information, and the practitioner still considers material inconsistency with it. In practice the whole draft report gets read, and the sections outside scope attract comment without attracting a conclusion.

Who provides assurance. In practice this will usually be your financial report auditor to improve efficiency and coordination. It is a commercial decision rather than a requirement of the Corporations Act, except for registrable superannuation entities. In Australia, ASSA 5000 also prohibits the use of direct assistance from internal auditors on a sustainability assurance engagement. 

What evidence you need in Year 1

1. A Basis of Preparation for Scope 1 & 2 emissions, setting out boundary, methodology, emission factors and their sources, and reporting policies
2. Emissions inventory input data traceable to source documents, with the calculation from source data to published figure reproducible
3. Governance evidence dated within the reporting period, including charter or terms of reference language and minutes showing climate was considered
4. The materiality assessment and the basis for treating risks as material or not material
5. A description of the controls and procedures over the reporting process, including who reviews what
6. Board or committee approval of the final disclosures, dated
7. A reconciliation between published figures and the working files, with any late adjustments documented

Common mistakes

• Reading Year 1 as light-touch across the whole report. Governance is limited-assured from Year 1 and carries no transition relief and no proportionality mechanism, so it has to be right immediately.
• Assuming Year 1 Strategy assurance covers the pillar. It covers three subparagraphs. Entities that scope their evidence to the whole pillar over-prepare, and entities that assume none of Strategy is in scope under-prepare.
• Treating unassured sections as drafts. They are required disclosures, they are read, and they become the comparative you report against next year.
• Building governance evidence after year end. Assurance tests whether oversight happened during the period, which is a question a document created in month thirteen cannot answer.
• Not checking your own Year 4. Reasonable assurance sounds distant until you count from your own first reporting year. For a Group 1 entity with a June year end, Year 4 commences 1 July 2028.
• Leaving assurance scope to be settled during the audit. The disclosures in scope, the evidence expected and the timing are all cheaper to agree in the engagement letter.
  
  

Trace's viewpoint and approach

The narrow Year 1 scope is a sequencing instruction, not a reduction in what you have to produce.

For the disclosures inside Year 1 scope, the evidence has to be assurance-grade now. There is no easing-in period for governance, and governance in particular cannot be reconstructed after year end.

For everything else, Year 1 is the year to get the methodology defensible rather than the evidence pack exhaustive. Scenario analysis and metrics move into limited assurance in Year 2, so the method you document this year is what gets tested next year.

Agree scope with your auditors and Board before starting the work. Most of the friction we see is not disagreement about the standard, it is a scope conversation happening at the wrong time.

Frequently asked questions

Q: Does our financial statement auditor have to do our climate assurance? Not as a matter of law, other than for registrable superannuation entities, which can only have one auditor. Most entities will use their financial report auditor and there are real coordination benefits, particularly on consistency between the climate disclosures and the financial statements, but appointing a different provider is permitted. If you do, plan for how inconsistencies between the two reports get resolved.

Q: Our scenario analysis is not assured this year. Can it be rough? No, for three reasons. It is a required disclosure regardless of assurance scope. Your practitioner will read it and may comment on it even though they are not concluding on it. And it moves into limited assurance in Year 2, at which point this year's method and documentation become the starting point.

Q: When do we need to gain reasonable assurance? Year 4 of your own reporting, which for a Group 1 entity means a period commencing between 1 July 2028 and 30 June 2029, for Group 2 between 1 July 2029 and 30 June 2030, and for Group 3 between 1 July 2030 and 30 June 2031. From Year 6 reasonable assurance applies to all mandatory climate disclosures.

Q: We are a Group 3 entity and we do not think we have material climate risks. Does that avoid assurance? No. A statement under section 296B that there are no material climate-related risks or opportunities is itself subject to assurance, phased in the same way as the Strategy risks and opportunities disclosures. The materiality assessment behind the conclusion is what gets tested.

Relevant links

• When must governance be evidenced?
• What governance documentation does AASB S2 require?
• Which reporting group am I in?