Overcoming Climate Data Challenges in AASB S2 Compliance

As organisations prepare for Australian Sustainability Reporting Standards (ASRS) compliance, they encounter significant hurdles in climate data management and analysis. These challenges are particularly evident when meeting AASB S2 requirements. Here are the key issues:

Data Gaps and Quality Issues

• Inconsistent data availability across asset classes

• Varying data quality from different sources and jurisdictions

• Difficulties in establishing reliable historical baselines

Organisations often struggle to obtain consistent, high-quality data across their entire portfolio. This is especially challenging for companies with diverse assets or operations in multiple jurisdictions.

Scope 3 Emissions Calculation

• Complexities in gathering data across complex value chains

• Challenges in assessing financed emissions for financial institutions

Scope 3 emissions, representing indirect emissions in a company's value chain, are often the most difficult to quantify accurately. This is particularly challenging for financial institutions dealing with financed emissions.

Robust Scenario Analysis

• Developing forward-looking climate scenarios aligned with ASRS requirements

• Managing uncertainty in long-term climate impact projections

• Limited internal expertise in climate science and modelling

Scenario analysis is a key requirement of AASB S2, but many organisations lack the internal capabilities to perform this complex task effectively.

Climate Risk Assessment for Diverse Portfolios

• Quantifying physical and transition risks across varied assets and sectors

• Translating climate risks into financial impacts

Assessing climate risks across a diverse multi-asset portfolio requires sophisticated analysis and a deep understanding of how climate change affects different sectors and regions.

Aligning with Financial Reporting

• Integrating climate data with traditional financial metrics

• Quantifying long-term climate risks within short-term reporting cycles

• Ensuring consistency between climate and financial disclosures

Bridging the gap between climate-related disclosures and traditional financial reporting is a significant challenge for many organisations.

Assurance Readiness

• Ensuring data accuracy for external verification

• Establishing robust audit trails for climate-related data

• Preparing for evolving assurance requirements

As assurance requirements for climate-related disclosures become more stringent, organisations need to ensure their data and processes can withstand external scrutiny.

Resource and Expertise Constraints

• Limited internal capabilities in climate data analysis

• Balancing comprehensive climate reporting with other business priorities

• Keeping pace with evolving ASRS requirements

Many organisations face resource constraints and struggle to develop the internal expertise needed for comprehensive climate reporting.

By understanding and addressing these challenges, organisations can better prepare for AASB S2 compliance and improve the quality of their climate-related financial disclosures. Overcoming these hurdles often requires a combination of internal capability building, external expertise, and robust data management systems.