Climate reporting glossary

A

Activity-based measurement

A method of calculating greenhouse gas (GHG) emissions using actual activity data (e.g. litres of fuel, kilometres travelled, kWh consumed, tonnes purchased) multiplied by recognised emission factors. Preferred under AASB S2 and the GHG Protocol where reasonably available because it is more accurate, auditable and decision‑useful than spend‑based methods.

See also: Emissions factors; Emissions measurement; Spend‑based method.

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‍Assurance (AASB S2 context)

Assurance is the independent verification of sustainability information, designed to give confidence that disclosures are accurate and free from material misstatement.

Under AASB S2, assurance requirements are phased in. In the early years, certain disclosures are subject to limited assurance. By 1 July 2030, all mandatory climate disclosures must be subject to reasonable assurance.

The assurance framework is set by the AUASB through its sustainability assurance standards (ASSA 5000 and ASSA 5010).

See also: Regulatory Guide 280 (RG 280) which outlines ASIC’s perspective on disclosure quality and avoiding greenwashing.

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Audit (AASB S2 context)

Audit refers to the independent review of climate-related disclosures as part of an organisation’s reporting obligations.

In early phases, climate disclosures are subject to limited assurance, with scope expanding over time. From 1 July 2030, all disclosures under AASB S2 must be audited to reasonable assurance level.

Audits will cover governance, strategy, risk management, and metrics and targets in line with the disclosure structure of AASB S2 and AUASB assurance standards.

See also: Assurance (AASB S2 context);Sustainability report. Regulatory Guide 280 (RG 280), for how assurance interacts with ASIC’s enforcement approach

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Australian Accounting Standards Board (AASB)

The Australian government agency responsible for developing, issuing, and maintaining accounting and sustainability reporting standards. It operates under the Financial Reporting Council and aligns its work with international best practice.

In September 2024, the AASB issued:

• AASB S1 (voluntary general sustainability disclosures), and
• AASB S2 (mandatory climate-related disclosures).

These standards are collectively referred to as the Australian Sustainability Reporting Standards (ASRS).

See also: Australian Sustainability Reporting Standards (ASRS); AASB S1; AASB S2; IFRS S2.

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Australian Auditing and Assurance Standards Board (AUASB)

The AUASB develops auditing and assurance standards in Australia. It is responsible for the sustainability assurance standards, including interim mandatory assurance requirements prior to the legislated end state of mandatory assurance over all climate disclosures by 1July 2030.

See also: Assurance (AASB S2 context); Audit (AASB S2 context).

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Australian Institute of Company Directors (AICD)

The AICD is a professional association that provides education, training and advocacy for directors and governance professionals. It promotes effective governance practices and hosts the Australian chapter of the Climate Governance Initiative.

See also: Governance (AASB S2 context).

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Australian Securities and Investments Commission (ASIC)

ASIC is Australia’s corporate regulator, responsible for enforcing company and financial services laws. Under AASB S2,ASIC plays a key role in providing regulatory guidance (such as Regulatory Guide 280 on sustainability reporting), overseeing compliance with the Corporations Act, and acting against misleading disclosure or greenwashing. ASIC’s focus is on ensuring climate-related disclosures are reliable, decision-useful, and not misleading for investors.

See also: Regulatory Guide 280 (RG 280) on sustainability reporting, which sets ASIC’s expectations for climate and sustainability disclosures; Greenwashing.

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Australian Sustainability Reporting Standards (ASRS)

The Australian Sustainability Reporting Standards include two standards:

• AASB S1 (voluntary sustainability disclosures).
• AASB S2 (mandatory climate-related disclosures)

They were issued in 2024, adapted from the ISSB’s IFRS S1 and IFRS S2.

See also: AASB S1; AASB S2; Mandatory Climate Reporting

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Australian Sustainability Reporting Standard 1 (AASB S1)

The voluntary general sustainability reporting standard forming part of the Australian Sustainability Reporting Standards. It was adapted from IFRS S1 and is designed for disclosures beyond climate (such as biodiversity and nature). While not mandatory, AASB S1 can be used by organisations to demonstrate broader sustainability maturity.

See also: AASB S2; IFRS S1.

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Australian Sustainability Reporting Standard 2 (AASB S2)

The mandatory climate disclosure standard forming part of the Australian Sustainability Reporting Standards. Organisations captured by Australia’s climate reporting regime must disclose against AASB S2. It is adapted from IFRS S2 and covers 149 disclosure requirements across governance, strategy, risk management, and metrics and targets.

See also: Scope 1 emissions; Scope 2 emissions;Scope 3 emissions; Climate scenario analysis; Regulatory Guide 280 (RG 280), which provides practical guidance on how sustainability disclosures should be prepared and presented under Australian law.

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B

Biodiversity

Biodiversity refers to the variability among living organisms, including diversity within and between species and ecosystems. It underpins ecosystem services such as pollination, clean water, and fertile soil, which are fundamental to business continuity.

See also: Ecosystem; Physical risks.

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Blue Carbon

Blue carbon is the carbon stored in coastal and marine ecosystems, which sequester large amounts of carbon from the atmosphere, and are an important part of global carbon sequestration.

See also: Carbon credit; Carbon offsetting.

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Business model

A company’s system for using resources and relationships to deliver value, generate cash flow, and achieve strategic purposes. Under AASB S2, companies must explain how climate risks and opportunities affect their business model.

See also: Transition plan; Strategy (withinAASB S2).

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C

Carbon accounting

Carbon accounting refers to the discipline of measurement and accounting techniques that serve to measure the carbon footprint of an organisation or individual, and the trading of carbon credits or offsetting techniques involved in this domain.

See also: Emissions measurement; GHGProtocol; Activity‑based measurement; Spend-based measurement.

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Carbon capture

Carbon capture refers to technologies and processes that remove carbon dioxide (CO₂) directly from emission sources such as power plants, industrial facilities, or in some cases the ambient air.

The CO₂ is separated from other gases during combustion or industrial processes. Captured CO₂ can then be compressed, transported, and either stored or utilised.

Carbon capture is often viewed as a complementary technology to emissions reduction, helping address hard-to-abate sectors such as cement, steel, and chemicals.

See also: Carbon capture and storage (CCS).

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Carbon capture and storage (CCS)

Carbon capture and storage is the process of capturing carbon dioxide (CO₂) emissions from industrial or energy sources, transporting it, and permanently storing it underground in geological formations such as depleted oil and gas reservoirs or deep saline aquifers.

• CCS prevents CO₂ from entering the atmosphere and contributing to climate change.
• It is recognised in international climate pathways (such as those of the International Energy Agency and IPCC) as a transitional tool for decarbonising heavy industry and energy.
• Under AASB S2, entities may disclose CCS projects as part of their transition plans, including their expected role in meeting emissions targets.

See also: Transition plan; Metrics and targets.

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Carbon credit

A certificate representing one tonne of reduced or removed greenhouse gas (GHG) emissions, issued under an accredited carbon crediting programme. Credits can be purchased to offset emissions. For example, a reforestation project may generate carbon credits by absorbing CO₂ from the atmosphere.

According to the Science Based Targets initiative (SBTi), carbon credits should not be used as a substitute for cutting emissions. They may only be applied to neutralise residual emissions after an organisation has undertaken deep decarbonisation in line with a net zero pathway.

See also: Carbon offsetting.

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Carbon cycle

A carbon cycle is the Earth’s natural way of recreating carbon atoms, which is done when carbon is exchanged within the biosphere, hydrosphere, pedosphere, geosphere, and the Earth’s atmosphere.

See also: Greenhouse effect; Global warming.

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Carbon dioxide equivalent (CO₂-e)

A standard unit for comparing the climate impact of different greenhouse gases by expressing them in terms of the warming potential of one unit of carbon dioxide (CO₂). It covers all seven greenhouse gases regulated under the Kyoto Protocol and Australia’s NGER Scheme:

• Carbon dioxide (CO₂)
• Methane (CH₄)
• Nitrous oxide (N₂O)
• Hydrofluorocarbons (HFCs)
• Perfluorocarbons (PFCs)
• Sulphur hexafluoride (SF₆)
• Nitrogen trifluoride (NF₃)

This allows emissions from different gases to be reported on a like-for-like basis, using a single comparable metric.

For example, methane has a global warming potential roughly 29.8 times higher than CO₂, so one tonne of methane is reported as 29.8 tonnes of CO₂-e. All emissions reported under AASB S2 must be expressed in CO₂-e to ensure consistency and comparability.

See also: Global warming potential (GWP); Greenhouse gases (GHGs).

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Carbon footprint

The total greenhouse gas emissions (measured in CO₂‑e) associated with a company, product, or activity. It typically includes Scope 1, Scope 2, and relevant Scope 3 emissions.

See also: Scope 1 emissions; Scope 2 emissions; Scope 3 emissions.

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Carbon neutral

A state where an organisation balances its greenhouse gas emissions with an equivalent amount of emissions offsets, typically through purchasing carbon credits. Unlike net zero, which requires deep cuts across the value chain before addressing residual emissions, carbon neutrality can technically be achieved through offsetting alone without major reductions.

For example, a business may claim carbon neutrality by purchasing enough offsets to match its annual emissions, even if it has not reduced its operational footprint.

See also: Net zero; Carbon offsetting.

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Carbon offsetting

An action or investment that compensates for greenhouse gas (GHG) emissions by reducing or removing emissions elsewhere. Offsets are typically measured in tonnes of carbon dioxide equivalent (tCO₂-e) and are represented by carbon credits, which are issued, tracked, and retired through accredited registries.

Examples of offset projects include reforestation, renewable energy generation, or methane capture from landfills.

According to the Science Based Targets initiative (SBTi), offsets should only be used for residual emissions after significant reductions have been achieved. They cannot replace the need for deep decarbonisation when pursuing net zero.

See also: Carbon credit.

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CDP (formerly Carbon Disclosure Project)

CDP is a voluntary global disclosure framework for companies, cities, and investors to report environmental performance. It is widely recognised by investors and aligns with many aspects of ISSB and AASB S2.

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Climate Disclosure Standards Board (CDSB)

The CDSB was a framework for climate reporting established in 2007. It was consolidated into the International Sustainability Standards Board (ISSB) in 2021.

See also: ISSB; IFRS S2.

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Climate governance initiative (CGI)

The Climate Governance Initiative is a global network of non-executive directors promoting climate as a boardroom priority, hosted in Australia by the AICD.

See also: Governance (AASB S2 context).

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Climate-related physical risks

Risks arising from climate change impacts on physical systems. They can be acute (storms, floods, fires, heatwaves) or chronic (sea level rise, biodiversity loss, long-term drought). These risks can damage assets, disrupt supply chains, and increase costs.

See also: Physical risks; Climate resilience.

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Climate-related risks

The potential negative effects of climate change on a business. They include physical risks and transition risks (e.g. policy changes, technology shifts, market trends).

See also: Transition risks; Physical risks.

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Climate-related opportunities

The potential positive effects arising from climate change for a business. Examples include developing new low-carbon products, improving efficiency, or accessing green finance.

See also: Metrics and targets; Transition plan.

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Climate-related transition risks

Risks linked to the global shift to a low-carbon economy. These include regulatory changes, carbon pricing, technology disruption, and reputational pressures.

See also: Transition risks; Internal carbonprice.

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Climate reporting legislation

The legislative basis for Australia’s mandatory climate reporting regime, passed in September 2024 under the Treasury Laws Amendment Bill.

See also: Group 1 entities; Group 2entities; Group 3 entities; AASB S2.

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Climate resilience

A business’s ability to withstand and adapt to climate-related shocks while capturing opportunities. Climate resilience includes both strategic and operational capacity.

See also: Climate scenario analysis; Strategy (within AASB S2).

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Climate scenario analysis

A structured method to evaluate how different climate futures (e.g. 1.5 °C vs 3–4 °C) could affect the business model, financials and resilience. AASB S2 requires disclosure of the scenarios used, assumptions, time horizons and key results, including potential financial effects.

See also: Climate resilience; Transition plan.

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Corporate Social Responsibility (CSR)

A business approach centred on voluntary initiatives to manage and improve a company’s social and environmental impact. CSR often involves philanthropy, community programs, or sustainability projects chosen by the company.

Unlike ESG, which is increasingly tied to financial materiality, investor expectations, and regulation, CSR is typically voluntary and less standardised. For example, a company may run a CSR program to fund local environmental projects, while ESG requires structured disclosure of environmental and governance performance.

See also: ESG.

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Corporate Sustainability Reporting Directive (CSRD)

The European Union’s Corporate Sustainability Reporting Directive is a mandatory disclosure regime applying from 2024 to large companies and listed SMEs operating in the EU. It requires reporting against the European Sustainability Reporting Standards (ESRS) and adopts a double materiality approach, covering climate, nature, social, and governance topics. While broader in scope than AASB S2, CSRD is relevant for Australian companies with operations or supply chain links in Europe.

See also: ESRS; Double materiality; AASB S2.

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D

Decarbonisation

The process of reducing greenhouse gas emissions by shifting to low-carbon energy, improving efficiency, or using removals technologies.

See also: Transition plan; Metrics and targets.

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Disclosure topic (legacy term)‍

A term used under the SASB Standards and the Value Reporting Foundation to categorise sustainability issues for disclosure.

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Under ISSB and AASB S2, the concept of disclosure topics has been replaced by a set of required disclosures structured around governance, strategy, risk management, and metrics and targets. The term is retained in legacy documents but is no longer a defined concept in AASB S2.

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Double materiality

An approach that considers both:

1. how climate risks and opportunities affect the company’s financial performance
2. how the company’s activities impact the environment and society

See also: Materiality; CSRD.

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Downstream emissions

Emissions that occur after a product or service leaves the reporting organisation. Examples include the transportation and distribution of goods to customers, the processing and use of sold products, and end-of-life treatment such as disposal or recycling. These are captured in Scope 3 categories 9 to 15 under the GHG Protocol.

See also: Scope 3 emissions; Upstream emissions.

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E

Ecosystem

A community of living organisms interactingwith their physical environment (e.g. a forest, reef or wetland). Ecosystemdegradation can exacerbate physical climate risks and supply chain disruption.

See also: Biodiversity; Physical risks.

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Emissions

The release of greenhouse gases into the atmosphere. Emissions are categorised as direct (Scope 1), indirect from purchased energy (Scope 2), or other indirect emissions across the value chain (Scope 3). Under AASB S2, companies must disclose Scope 1, 2, and relevant Scope 3 emissions in CO₂-e.

See also: Scope 1 emissions; Scope 2emissions; Scope 3 emissions.

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Emissions factors

Numerical values that convert activity data into greenhouse gas emissions. For example, burning one litre of petrol produces about 2.31 kilograms of CO₂-e. Emission factors are published by authorities such as the Department of Climate Change, Energy, the Environment and Water (DCCEEW) and the Intergovernmental Panel on Climate Change (IPCC). Using recognised emission factors is essential for comparability and auditability.

See also: GHG Protocol; Emissions measurement; Activity‑based measurement; Spend-based measurement;

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Emissions measurement‍

The process of quantifying greenhouse gas emissions using activity data and emissions factors. Under AASB S2, organisations must disclose:

• Scope 1 emissions (direct),

• Scope 2 emissions (indirect from purchased energy), and

• Relevant Scope 3 emissions (value-chain emissions that are material).

Emissions should be measured in line with the GHG Protocol, unless another jurisdictional method is required. Activity-based measurement is preferred; spend-based methods may only be used when activity data is not reasonably available, and organisations must disclose any assumptions, limitations, and uncertainty associated with that approach.

See also: GHG Protocol; Activity‑based measurement; Spend-based measurement; Emissions factors

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Energy Mix

Energy mix refers to the breakdown of energy consumption in a given geographical area, broken down by energy source (for example: renewable energy, natural gas, coal, petroleum etc.)

See also: Scope 2 emissions; Transition risks.

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Environmental, Social and Governance (ESG)

A framework used by investors, regulators, and businesses to assess an organisation’s performance on non-financial factors:

• Environmental - impact on the natural environment (e.g. emissions, resource use, biodiversity).
• Social - impact on people and communities (e.g. labour practices, diversity, health and safety).
• Governance - quality of leadership, board oversight, risk management, and transparency.

ESG has become a dominant lens in investment and corporate reporting, and it overlaps with sustainability and climate reporting frameworks such as AASB S2.

See also: AASB S2; Materiality, Sustainability

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European Sustainability Reporting Standards (ESRS)

A set of mandatory sustainability disclosure standards developed by the European Financial Reporting Advisory Group (EFRAG) under the Corporate Sustainability Reporting Directive (CSRD). The ESRS require in-scope companies in the EU to report on a wide range of environmental, social, and governance (ESG) topics, going beyond climate to include biodiversity, workforce, and human rights.

The ESRS are broader in scope than the ISSB’s IFRS S1 and IFRS S2 and differ from the Australian Sustainability Reporting Standards (ASRS: AASB S1 and AASB S2). However, they are designed to remain interoperable with global frameworks to reduce reporting burden for multinational entities.

See also: CSRD; Double materiality.

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F

Financed emissions

Emissions associated with lending, investment, and insurance portfolios. These are typically reported by banks, insurers, and asset managers and fall under Scope 3, Category 15.

See also: PCAF; Scope 3 emissions, Insured emissions

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Fossil fuels

Coal, oil and natural gas- hydrocarbon fuels formed over geological timescales. Combustion is a major source of CO₂ and other GHGs.

See also: Energy mix; Renewable energy; Transition risks;

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G

General purpose financial reports

Reports that provide financial information about an entity useful to investors, lenders, and creditors. For entities in scope, the general purpose financial report must also include climate-related disclosures as required under AASB S2.

These disclosures sit alongside the financial report, directors’ report, and auditor’s report. Broader sustainability disclosures under AASB S1 remain voluntary.

See also: Sustainability report; Primary users.

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GHG Protocol (Greenhouse Gas Protocol)

The international standard for measuring and reporting greenhouse gas emissions, developed by WRI and WBCSD. AASB S2 requires emissions reporting to follow the GHG Protocol unless another jurisdictional method is mandated.

See also: Emissions measurement; Scope 3 emissions.

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Global Warming

Global warming refers to the rising global temperatures around the world, and the effects of these rising temperatures on the planet, life, and society.

See also: Greenhouse effect.

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Global warming potential (GWP)

Warming potential is a factor that expresses how much heat a greenhouse gas traps in the atmosphere compared to carbon dioxide (CO₂), over a specific time horizon (typically 100 years).

• CO₂ has a GWP of 1 by definition.
• Methane (CH₄) has a GWP of approx. 29.8, meaning one tonne of methane warms the atmosphere as much as 29.8 tonnes of CO₂.
• Nitrous oxide (N₂O) has a GWP of around 273.

Under AASB S2, all greenhouse gas emissions must be converted into carbon dioxide equivalent (CO₂-e) using GWP factors published by the Intergovernmental Panel on Climate Change (IPCC). Reporters should identify which IPCC Assessment Report (e.g. AR6) is used, as values differ slightly between reports.

See also: Carbon dioxide equivalent (CO₂‑e); Greenhouse gases (GHGs).

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Governance (AASB S2 context)

Governance refers to the structures and processes by which boards and management oversee climate-related risks and opportunities. Under AASB S2, organisations must disclose the roles and responsibilities of the board and committees, how climate issues are integrated into governance processes, and how management is held accountable. These requirements align with the governance pillar of the TCFD framework.

See also: AASB S2; Remuneration linkage; Transition plan.

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Greenhouse Effect

The greenhouse effect is when greenhouse gasses in the atmosphere trap the sun’s heat, and result in higher temperatures.

See also: Global warming; Greenhouse gases (GHGs).

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Greenhouse gases (GHGs)

The seven gases listed in the Kyoto Protocol:

1. carbon dioxide (CO₂)
2. methane (CH₄)
3. nitrous oxide (N₂O)
4. hydrofluorocarbons (HFCs)
5. perfluorocarbons (PFCs)
6. sulphur hexafluoride (SF₆)
7. nitrogen trifluoride (NF₃)

To enable simple and consistent reporting, these gases are reported in terms of CO₂‑e.

See also: Kyoto Protocol; Carbon dioxide equivalent (CO₂-e); Global warming potential (GWP).

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Greenhushing

The practice of under-reporting or concealing sustainability progress due to fear of scrutiny, liability, or accusations of greenwashing.

See also: Greenwashing; Regulatory Guide 280 (RG 280).

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Greenwashing

The act of misleading stakeholders about a company’s environmental credentials, either by exaggeration or omission.

See also: Regulatory Guide 280 (RG 280), which includes ASIC’s expectations for avoiding misleading or deceptive environmental claims.

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Group 1 entities (AASB S2 context)

Group 1 are the largest entities captured by Australia’s mandatory climate reporting regime. Defined as listed and unlisted entities that meet two of the following three criteria:

1. Consolidated revenue >$500 million
2. Consolidated assets >$1 billion
3. >500 employees

Group 1 entities are required to report under AASB S2 from financial years commencing on or after 1 January 2025. Examples of Group 1 entities include Commonwealth Bank, Woolworths and Origin Energy Ltd.

Group 1 entities set the benchmark for early compliance and are expected to adopt assurance and governance best practice ahead of smaller entities.

‍See also: Group 2 entities; Group 3 entities; AASB S2

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Group 2 entities (AASB S2 context)

Group 2 are medium-large entities captured in the second phase of Australia’s climate reporting rollout. Defined as listed and unlisted entities that meet two of the following three criteria:

1. Consolidated revenue >$200 million
2. Consolidated assets >$500m
3. >250 employees

Group 2 entities are required to report under AASB S2 from financial years commencing on or after 1 July 2026 (FY27).

Group 2 entities represent a large share of Australia’s mid-cap market, and many are starting readiness assessments now to prepare for assurance requirements.

‍See also: Group 1 entities; Group 3 entities; AASB S2

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Group 3 entities (AASB S2 context)

Group 3 are smaller entities captured in the third phase of Australia’s climate reporting rollout. Defined as listed and unlisted entities that meet two of the following three criteria:

1. Consolidated revenue >$50 million
2. Consolidated assets >$25m
3. >100 employees

Required to report under AASB S2 from financial years commencing on or after 1 July 2027 (FY28).

While the thresholds are lower, Group 3 entities must still meet the same disclosure requirements across governance, strategy, risk management, and metrics and targets.

‍See also: Group 1 entities; Group 2 entities; AASB S2

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I

IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information)

Issued by the ISSB in June 2023, IFRS S1 sets out the overarching concepts and requirements for sustainability-related disclosures across all topics (not just climate). It provides the foundation for consistency and comparability in sustainability reporting globally.

In Australia, IFRS S1 was adapted into AASB S1, which serves as a voluntary sustainability reporting standard.

See also: AASB S1; AASB S2.

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IFRS S2 (Climate-related Disclosures)

Issued by the ISSB in June 2023, IFRS S2 establishes requirements for disclosing climate-related risks and opportunities. It builds on the Task Force on Climate-related Financial Disclosures (TCFD) framework, covering governance, strategy, risk management, and metrics and targets.

In Australia, IFRS S2 has been adapted into AASB S2, which is mandatory for in-scope entities under the Mandatory Climate Reporting regime.

See also: AASB S1; AASB S2.

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Impracticable

A disclosure is impracticable when it cannot be made after every reasonable effort. Recognised in AASB S2 for rare data gaps.

See also: Scope 3 emissions.

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Insured emissions

Emissions associated with an insurer’s underwriting portfolio. For example, an insurer providing coverage to coal-fired power plants has insured emissions linked to those activities. These are considered part of Scope 3, Category 15 (investments) under the GHG Protocol and are material for insurers reporting under AASB S2.

See also: Financed emissions; PCAF; Scope 3 emissions.

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Integrated Reporting Framework (IRF)

The Integrated Reporting Framework was originally developed by the International Integrated Reporting Council (IIRC) in 2013 to promote a more connected approach to corporate reporting.

In 2021, the IIRC merged with SASB to form the Value Reporting Foundation (VRF). Later that year, the IFRS Foundation consolidated the VRF into the ISSB. As a result, the concepts of integrated reporting continue under the ISSB rather than as a separate framework.

‍See also: Value Reporting Foundation; ISSB.

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Internal carbon price

A price an organisation assigns to its own greenhouse gas emissions for internal decision-making. It helps assess the financial impact of emissions on investments, operations, or projects.

Common approaches include:

• Shadow price – a theoretical carbon cost used to model the economics of future carbon regulations or risks, without actual charges applied.
• Internal tax or fee – a price charged within the business (e.g. to business units or projects) based on their emissions, encouraging lower-carbon choices.

For example, a company may apply an internal carbon price of $75 per tonne of CO₂-e when evaluating new capital projects, even if no external carbon tax exists yet.

See also: Transition risks; Metrics and targets.

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International Accounting Standards Board (IASB)

The independent standard-setting body responsible for developing and issuing financial accounting standards under the IFRS Foundation. Its focus is on financial reporting, not sustainability.

Together with the ISSB, the IASB ensures connectivity between financial statements and sustainability disclosures.

See also: IFRS; ISSB.

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International Energy Agency (IEA)

The International Energy Agency is an intergovernmental organisation established in 1974 under the framework of the OECD. Its role is to provide authoritative analysis, policy advice, and data on global energy systems.

The IEA develops scenarios and pathways for the global energy transition, including the Net Zero by 2050 Roadmap. In this work, the IEA identifies technologies such as renewables, electrification, energy efficiency, and carbon capture and storage (CCS) as critical to achieving international climate goals.

For companies reporting under AASB S2, IEA scenarios are often referenced in climate scenario analysis to test the resilience of business models and transition plans against credible global energy pathways.

See also: Climate scenario analysis; OECD.

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International Financial Reporting Standards (IFRS) Foundation

The organisation overseeing the IASB and ISSB. It develops globally recognised accounting and sustainability standards.

See also: IFRS S1; IFRS S2; ASRS.

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International Financial Reporting Standards (IFRS)

A set of globally recognised accounting and sustainability disclosure standards issued by the IFRS Foundation, a not-for-profit body. IFRS is overseen by two boards:

• International Accounting Standards Board (IASB) – focused on financial accounting standards, and
• International Sustainability Standards Board (ISSB) – focused on sustainability-related disclosure standards.

IFRS standards form the basis for the Australian Sustainability Reporting Standards (ASRS), which include AASB S1 and AASB S2.

See also: IASB; ISSB.

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International Sustainability Standards Board (ISSB)

Established in 2021 by the IFRS Foundation, the ISSB develops sustainability disclosure standards that form a global baseline for consistent and comparable reporting.
In June 2023 it issued the first two standards:

• IFRS S1 (General sustainability disclosures), and
• IFRS S2 (Climate-related disclosures).

In Australia, these standards have been adapted into the Australian Sustainability Reporting Standards (ASRS): AASB S1 (voluntary) and AASB S2 (mandatory).

See also: IFRS S1; IFRS S2; AASB S2.

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Impact

The positive or negative effect an organisation has on the economy, environment, and people, including human rights impacts.

See also: Double materiality; Materiality.

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International Organisation of Securities Commissions (IOSCO)

A global body of securities regulators, covering more than 95% of the world’s securities markets. It supports adoption of ISSB standards.

See also: ISSB; ASIC.

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K

Kyoto Protocol

The Kyoto Protocol is an international treaty adopted in 1997 under the United Nations Framework Convention on Climate Change (UNFCCC). It was the first legally binding agreement that committed developed countries to reduce greenhouse gas emissions.

Key features:

• Entered into force in 2005 and set binding emission reduction targets for 37 industrialised countries and the European Community.
• Introduced market-based mechanisms such as international emissions trading, the Clean Development Mechanism (CDM), and Joint Implementation (JI) to help countries meet their targets.
• Identified a basket of seven greenhouse gases — carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF₆), and nitrogen trifluoride (NF₃). These remain the standard gases reported under the GHG Protocol and AASB S2.

Although superseded by the Paris Agreement in 2015, the Kyoto Protocol laid the foundation for today’s climate reporting frameworks by establishing a common language for greenhouse gases and the principle of legally binding targets.

See also: Greenhouse gases (GHGs); Paris Agreement; Australian Sustainability Reporting Standard 2 (AASB S2).

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L

Life Cycle Assessment (LCA)

Lifecycle assessment is a method for evaluating the environmental impacts of a product, service, or activity across its entire life cycle. It looks beyond direct emissions to consider upstream and downstream effects.

Key stages typically assessed include:

1. Raw material extraction – impacts from sourcing and processing raw inputs.
2. Manufacturing and production – emissions and resource use during processing and assembly.
3. Distribution and transport – impacts from moving goods through supply chains.
4. Use phase – emissions generated during a product’s lifetime use (e.g. fuel consumption by a vehicle).
5. End-of-life – disposal, recycling, or re-use impacts at the end of the product’s life.

In climate reporting under AASB S2, lifecycle assessment can help organisations understand their Scope 3 emissions more comprehensively, especially in categories such as purchased goods and services, use of sold products, and end-of-life treatment.

See also: Scope 3 emissions; Supply chain; Value chain.

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M

Mandatory climate reporting

The obligation for companies to disclose climate-related financial risks and opportunities. Different jurisdictions apply different standards:

• Australia requires disclosure under AASB S2
• the European Union under CSRD (using ESRS)
• New Zealand under NZCS
• and the United States under the SEC’s climate rule.

Globally, the ISSB’s IFRS S2 provides the baseline. In Australia, AASB S2 is mandatory from FY25 for Group 1 entities, expanding to smaller entities in later years.

See also: AASB S2; Group 1 entities; Group 2 entities; Group 3 entities

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Materiality

Information is material if its omission or misstatement could influence decisions made by users of reports. AASB S2 adopts a financial materiality lens, but companies may also choose to report using double materiality.

See also: Primary users; Double materiality.

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Materiality assessment

The process of determining which topics are material to a company’s reporting, based on significance to financial performance and stakeholder impacts.

See also: Materiality; Risk management.

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Metrics and targets

Quantitative indicators and goals used to track performance against climate objectives, such as emission reduction targets.

See also: Net zero; Transition planning

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N

National Greenhouse and Energy Reporting Scheme (NGER)

Australia’s national framework for reporting greenhouse gas emissions, energy production, and energy consumption. Established under the National Greenhouse and Energy Reporting Act 2007, it requires large emitters and energy producers to submit annual reports to the Clean Energy Regulator.

The NGER Scheme underpins Australia’s climate policies and provides the emissions data used for AASB S2 climate disclosures. It covers all seven greenhouse gases reported in CO₂-e: CO₂, CH₄, N₂O, HFCs, PFCs, SF₆, and NF₃.

See also: Emissions measurement; Emissions factors.

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Natural environment

The natural surroundings in which life exists, including air, water, soil, and ecosystems.

See also: Physical risks; Biodiversity.

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Net zero‍

A state where an organisation reduces its greenhouse gas emissions to as close to zero as possible, and then permanently neutralises any residual emissions by removing an equivalent amount from the atmosphere.

According to the Science Based Targets initiative (SBTi), achieving net zero requires:

• Deep decarbonisation across value chains (usually 90–95% reduction in absolute emissions by the target year), and
• Neutralisation of residual emissions (the small percentage that cannot be eliminated) through high-quality carbon removals, such as reforestation or direct air capture.

SBTi guidance is clear that carbon credits or offsets should not be the primary tool — they may only be used for residual emissions after reductions are achieved.

See also: SBTi; Metrics and targets; Transition planning.

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New Zealand Climate Standards (NZCS)

New Zealand’s mandatory climate disclosure regime, introduced in 2023 and overseen by the External Reporting Board (XRB). The standards are aligned with the TCFD and ISSB but tailored to New Zealand’s regulatory environment. They apply primarily to large financial institutions, including banks, insurers, and investment managers.

See also: Mandatory climate reporting; IFRS S2; TCFD; ISSB; AASB S2

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O

Offset

A verified reduction or removal outside the reporting boundary used to compensate for emissions that remain after decarbonisation. Offsets are typically represented by carbon credits that are issued, tracked and retired on recognised registries. 

Under AASB S2, entities must disclose if and how offsets are used in targets and performance, including project type (reduction vs removal), nature‑based vs technological, additionality, durability/permanence and governance. Offsets should be reserved for residual emissions on a Paris‑aligned pathway.

See also: Carbon credit; Regulatory Guide 280 (RG 280).

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Organisation for Economic Co-operation and Development (OECD)

The Organisation for Economic Co-operation and Development is an intergovernmental body founded in 1961, bringing together 38 member countries to promote economic growth, stability, and improved standards of living.

The OECD provides research, policy guidance, and international standards across areas including taxation, trade, investment, governance, and environmental sustainability.

In the context of climate reporting:

• The International Energy Agency (IEA) was created under the framework of the OECD in 1974.
• OECD guidance on corporate governance, responsible business conduct, and environmental policy is often referenced by regulators and companies when developing sustainability strategies.
• While the OECD does not issue climate disclosure standards itself, its policy recommendations help shape the global environment in which AASB S2 and ISSB standards operate.

‍See also: International Energy Agency (IEA); Governance (AASB S2 context).

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P

Paris Agreement

The Paris Agreement is a legally binding international treaty on climate change adopted in December 2015 at the UN Climate Change Conference (COP21) in Paris. It built upon the Kyoto Protocol but broadened commitments to include both developed and developing countries.

Key features:

• Temperature goals: Commit to limiting global average temperature rise to well below 2°C above pre-industrial levels, while pursuing efforts to limit warming to 1.5°C.
• Nationally Determined Contributions (NDCs): Each country must prepare, communicate and update climate action plans that reflect its highest possible ambition, reviewed every five years.
• Global stocktake: A process that assesses collective progress towards the agreement’s long-term goals, undertaken every five years.
• Net zero alignment: Many jurisdictions, including Australia, have used the Paris Agreement as the foundation for legislated net zero commitments and climate disclosure standards.

Relevance to AASB S2

Australia’s mandatory climate reporting standard (AASB S2) is built on the global baseline established by the ISSB’s IFRS S2, which itself draws heavily on the Paris Agreement goals. Companies disclosing under AASB S2 are expected to assess the resilience of their strategies against Paris-aligned scenarios, including a 1.5°C pathway.

See also: Kyoto Protocol; Net zero; Australian Sustainability Reporting Standard 2 (AASB S2); Climate scenario analysis; Transition plan

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Partnership for Carbon Accounting Financials (PCAF)

A global partnership of financial institutions that develops and maintains a standard for measuring and disclosing financed emissions — the greenhouse gas (GHG) emissions linked to loans, investments, and other financial activities.

The PCAF Standard provides consistent methods for banks, insurers, and asset managers to calculate Scope 3, Category 15 emissions (investments) in line with the GHG Protocol. It is increasingly used to support alignment with IFRS S2 / AASB S2 disclosures.

See also: Financed emissions; Insured emissions; Scope 3 emissions.

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PCAF Data Quality Score

A five-tier scoring system developed by the Partnership for Carbon Accounting Financials (PCAF) to indicate the reliability of data used in calculating financed emissions. The scores range from 1 (highest quality) to 5 (lowest quality):

• Score 1 – Audited, company-specific emissions data.
• Score 2 – Company-reported data with limited assurance, or strong proxies closely tied to the activity.
• Score 3 – Modelled or estimated data using industry averages or benchmarks.
• Score 4 – Data based on generic emissions factors with limited sector relevance.
• Score 5 – Very rough estimates or assumptions, often due to data gaps.

The PCAF framework encourages financial institutions to improve data quality over time, moving toward higher-scoring, verifiable data sources.

See also: PCAF; Scope 3 emissions.; Activity-based measurement; Spend-based measurement

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Physical risks

Climate-related risks that arise from the physical effects of climate change. They are generally grouped into two categories:

• ‍Acute physical risks - Event-driven risks linked to extreme weather events, such as bushfires, floods, storms, cyclones, and heatwaves. These events can directly damage assets, disrupt operations, and affect worker safety.‍
• Chronic physical risks - Longer-term shifts in climate patterns, such as rising sea levels, changing rainfall patterns, persistent drought, and higher average temperatures. These risks can reduce agricultural productivity, threaten water availability, and impact infrastructure over time.

Physical risks can lead to direct financial losses (e.g. asset write-downs) or indirect impacts (e.g. supply chain disruption).

‍See also: Climate‑related physical risks; Climate resilience.

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Primary users

Investors, lenders, and creditors who rely on financial and sustainability reports to make decisions.

See also: Climate‑related physical risks; Climate resilience.

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R

Readiness assessment (AASB S2 context)

An evaluation of how prepared an organisation is to meet the disclosure requirements of AASB S2. It typically assesses governance documentation, emissions data, risk registers, and target-setting practices against the 149 disclosures required. The output is a roadmap to compliance and often informs resource planning and budgeting.

See also: AASB S2; Governance (AASB S2 context); Assurance (AASB S2 context).

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Regulatory Guide 280 (RG 280) on sustainability reporting

Published by ASIC in March 2025, RG 280 provides regulatory guidance on sustainability reporting, including climate-related disclosures under AASB S2.

RG 280 explains ASIC’s expectations for:

• How companies should apply materiality in sustainability disclosures
• The level of detail and evidence required to support claims
• Avoiding misleading or deceptive disclosure, including greenwashing
• The relationship between sustainability reporting requirements under the Corporations Act and AASB S2

RG 280 is intended to help directors, preparers, and auditors understand how sustainability information must be presented to ensure it is decision-useful for investors and compliant with Australian law.

See also: ASIC; Greenwashing.

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Remuneration linkage

The alignment of executive pay with climate or sustainability performance metrics.

See also: Governance (AASB S2 context); Metrics and targets.

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Renewable energy

Renewable energy, also sometimes referred to as clean energy, is the concept of using energy sources that are easily replenished and do not depend on the use of finite resources such as oils or fossil fuels.

See also: Energy mix; Fossil fuels; Scope 2 emissions.

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Reporting (AASB S2 context)

The process of publishing climate-related disclosures in line with AASB S2. These disclosures form part of the mandatory Sustainability Report, which sits alongside the financial report, directors’ report, and auditor’s report. Reporting must address governance, strategy, risk management, and metrics and targets.

‍See also: Sustainability report; General purpose financial reports; Regulatory Guide 280 (RG 280), which provides practical guidance on how sustainability disclosures should be prepared and presented under Australian law.

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Restatements

Corrections made to prior climate disclosures when errors or misstatements are discovered.

‍See also: Reporting (AASB S2 context).

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S

Scenario analysis

The process of evaluating how different climate pathways might impact a business. Used to test strategy resilience under conditions of uncertainty.

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Science Based Target initiative (SBTi)

The Science Based Target Initiative, better known as the SBTi, is an initiative that seeks to improve the global stance on climate change by providing companies who choose to apply for it with scientific data to help them set their carbon emissions reduction targets.

See also: Net zero; Metrics and targets.

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Scope 1 emissions

Direct greenhouse gas emissions from owned or controlled sources (e.g. fuels used to power company vehicles, on-site fuel or natural gas combustion, gas boilers, refrigerants, livestock).

See also: Emissions; Scope 2 emissions; Scope 3 emissions; Fossil fuels; Renewable energy; Metrics and targets

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Scope 2 emissions

Indirect emissions from purchased electricity, steam, heating, or cooling consumed by the entity. Reported by the consuming organisation, even though emissions occur at the generation site.

See also: Emissions; Scope 1 emissions; Scope 3 emissions; Fossil fuels; Renewable energy; Metrics and targets

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Scope 3 emissions

All other indirect emissions in a company’s value chain, both upstream and downstream. There are 15 Scope 3 categories defined by the GHG Protocol:

1. Purchased goods and services (e.g. raw materials, software licences)
2. Capital goods (e.g. buildings, machinery)
3. Fuel and energy related activities (not in Scope 1 or 2)
4. Upstream transportation and distribution (e.g. freight by suppliers)
5. Waste generated in operations (e.g. landfill, recycling)
6. Business travel (e.g. flights, hotels)
7. Employee commuting (e.g. car, train, bus)
8. Upstream leased assets (e.g. equipment rented by the company)
9. Downstream transportation and distribution (e.g. product delivery to customers)
10. Processing of sold products (e.g. ingredients processed by customers)
11. Use of sold products (e.g. fuel combustion in vehicles sold)
12. End-of-life treatment of sold products (e.g. disposal, recycling)
13. Downstream leased assets (leased out by the reporting entity)
14. Franchises (operations of franchises not owned)
15. Investments (emissions from loans, investments, managed assets).

‍See also: Emissions; Scope 1 emissions; Scope 2 emissions; PCAF; Financed emissions; Insured emissions; Metrics and targets; Transition plan

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Shadow price

A theoretical carbon cost used internally for decision-making but not charged.

See also: Internal carbon price; Transition risks.

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Spend Based Method

The Spend-Based Method is the first of two main approaches to carbon accounting, which works by taking the monetary value of a purchased good or service and then multiplying this value by a relative carbon emission factor in order to calculate the amount of greenhouse gas emissions produced. While less precise than activity-based measurement, it can be useful where detailed activity data is unavailable.

See also: Activity‑based measurement; PCAF data quality; Emissions measurement.

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Stakeholder

Individuals or groups affected by, or able to affect, an organisation’s activities (e.g. investors, employees, customers, suppliers, communities, regulators).

See also: Primary users; Governance (AASB S2 context).

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Supply chain

The network of suppliers, logistics providers, and other partners involved in delivering an organisation’s goods and services. Supply chains are a significant source of Scope 3 emissions, particularly in purchased goods, transport, and waste. AASB S2 requires organisations to measure and disclose relevant supply chain emissions.

See also: Scope 3 emissions; Value chain, Upstream emissions.

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‍Sustainability Accounting Standards Board (SASB)

An organisation that developed industry-specific sustainability metrics, now consolidated into the ISSB.

See also: Value Reporting Foundation; ISSB.

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Sustainability report

Under Australia’s climate reporting regime, this refers to the mandatory report (separate from the financial report, directors’ report and auditor’s report) that covers sustainability disclosures.

See also: General purpose financial reports; Reporting (AASB S2 context).

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T

Task Force on Climate-related Financial Disclosures (TCFD)

Established in 2015, the TCFD recommended climate disclosure across governance, strategy, risk management, and metrics and targets. Its recommendations were the foundation for IFRS S2 and AASB S2.

See also: IFRS S2; AASB S2.

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Transition plan

A time‑bound roadmap to align the business model with a low‑carbon economy. Should set credible targets, outline actions and capex, describe dependencies (e.g. technology, policy) and explain the role (if any) of carbon credits. Disclose progress, governance and resourcing under AASB S2.

See also: Metrics and targets; Governance (AASB S2 context).

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Transition risks

Risks associated with the shift to a lower-carbon economy. They can be grouped into four main categories:

1. ‍Policy and legal risks - New regulations, carbon pricing schemes, or litigation that increase compliance costs or create liabilities.‍
2. Technology risks - Disruption from emerging low-carbon technologies that make existing assets or processes obsolete.‍
3. Market risks - Shifts in supply and demand, such as declining demand for fossil fuels or rising demand for renewable energy.‍
4. Reputation risks - Damage to brand value, customer loyalty, or investor trust if a company is perceived as lagging on climate action.

Transition risks can impact revenue, costs, access to capital, and overall competitiveness.

‍See also: Climate‑related transition risks; Physical risks; Internal carbon price.

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Transition target

A specific, time-bound objective set by an organisation to reduce emissions or align with a low-carbon economy. Under AASB S2, organisations must disclose their targets, progress made, and whether targets are aligned with recognised frameworks such as the Science Based Targets initiative.

See also: Metrics and targets; SBTi; Transition planning

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U

Upstream emissions

Emissions that occur before a product or service reaches the reporting organisation. Examples include raw material extraction and processing, supplier transportation, and employee commuting. These are captured in Scope 3 categories 1 to 8 under the GHG Protocol.

See also: Scope 3 emissions; Supply chain; Value chain

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V

‍Value chain

All interactions, resources, and relationships involved in producing, delivering, and disposing of a company’s products and services. Covers upstream suppliers and downstream customers.

See also: Scope 3 emissions; Business model; Supply chain; Upstream emissions; Downstream emissions

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Value Reporting Foundation

An organisation formed by the merger of SASB and the Integrated Reporting Framework, consolidated into the ISSB in 2021.

See also: ISSB; SASB; Integrated Reporting Framework (IRF).