Climate Governance Under AASB S2: What Boards and Management Need to Show

The governance pillar of AASB S2 is the first disclosure area and, in some ways, the one that sets the tone for the rest of the report. It requires entities to describe how the board and management oversee and manage climate-related risks and opportunities — in a way that demonstrates genuine integration, not just surface-level acknowledgement.

Here’s what the standard requires and how to build documentation that supports it.

Board-level requirements

AASB S2 requires disclosure of the board’s oversight of climate-related risks and opportunities, including:

Which body has oversight responsibility. This could be the full board, an audit and risk committee, a sustainability committee, or a separate board climate committee. The entity must name the body and describe its role.

How the board is informed. What processes exist for management to provide climate-related information to the board? How often does the board (or committee) receive updates on climate risks, opportunities, and performance? What triggers an off-cycle briefing?

How climate considerations are integrated into board decisions. When the board reviews major capital expenditures, acquisitions, or strategic plans, how are climate-related considerations factored in? This should describe actual process — not aspirational statements.

Board skills and competency. AASB S2 encourages (and ASIC’s guidance emphasises) disclosure of whether the board has adequate climate-related expertise or how it accesses expert advice. This doesn’t require a climate scientist on the board — but it does require the board to demonstrate it can exercise informed oversight.

Management-level requirements

Below the board, AASB S2 requires disclosure of management’s role in assessing and managing climate-related risks and opportunities, including:

Whether management roles have climate accountability. Is there a Chief Sustainability Officer? A sustainability team? Does the CFO have climate risk responsibilities? Name the relevant roles.

What controls and procedures management uses to manage climate risks. How are climate-related risks identified, monitored, and escalated? What management reporting covers climate performance?

How climate information flows to the board. Describe the information chain from operational data to board reporting — including how frequently, in what form, and with what level of verification.

Common gaps in governance disclosures

No formal board process. Many companies’ boards discuss sustainability ad hoc — it comes up in a risk review, or a committee might mention it — but there’s no formal agenda item, no documented frequency, and no terms of reference that include climate. For AASB S2, informal processes don’t satisfy the disclosure requirement.

“The sustainability team handles it.” Delegating climate to the sustainability function and considering it done is insufficient. AASB S2 requires evidence that the board — not just management — actively oversees climate.

Generic descriptions. “The board periodically considers climate risk as part of its oversight of business risks” is a boilerplate statement that provides no substantive information. AASB S2 expects specifics: which meetings, what information, what decisions.

Building the governance infrastructure

For organisations preparing for first-year mandatory reporting, the governance section requires both documentation work and potentially process change:

Step 1: Formalise climate oversight at board level — amend committee terms of reference or a board-level risk policy to explicitly include climate.

Step 2: Establish a reporting cadence — at minimum, an annual presentation to the board (or relevant committee) covering climate risks, opportunities, metrics, and progress against targets.

Step 3: Create a management reporting process — define who is responsible for preparing climate reporting to the board, what data it draws on, and how it is reviewed before submission.

Step 4: Document everything — minutes, agendas, briefing papers, committee reports. The governance disclosure needs to be evidenced, not asserted.

Step 5: Assess board skills — if the board lacks climate expertise, document how it accesses external advice and consider whether additional director skills are needed.

What the assurance provider looks at

When reviewing the governance section under limited assurance, the assurance provider will:

• Ask for the relevant committee terms of reference
• Review board/committee minutes for evidence that climate is a standing agenda item
• Ask management to describe the process for preparing climate information for the board
• Assess whether the governance description in the report is consistent with the actual process

If there is no documentary evidence to support the governance disclosure, the assurance provider will flag this.

---

Ayika provides the data infrastructure that makes governance reporting credible — emissions metrics, dashboards, and approval records that management can confidently present to the board. Book a demo to see how.