A climate risk register may identify heat, flooding and the transition to a lower-emissions economy. The finance team still needs to work out what those risks mean for this business: which costs move, which cash flows change and whether asset assumptions remain reasonable.
That is where climate work connects with familiar finance responsibilities. The aim is to explain the business implications using evidence that management can challenge and update.
First establish what the organisation needs to report
Australia’s mandatory sustainability reporting requirements apply to specified entities under the Corporations Act and are being phased in. The required climate-related information is governed by AASB S2. They do not apply automatically to every Australian business. Use ASIC’s sustainability reporting guidance to establish the entity’s position, reporting period and applicable obligations.
A smaller business may still receive information requests from a larger customer, lender or supply-chain partner. Those requests should be understood on their own terms. They do not necessarily mean the smaller business must prepare the same statutory sustainability report. ASIC’s small business guidance addresses this distinction.
Define the immediate job before buying a system or commissioning a large report. Is the organisation preparing its first mandatory disclosure, improving a financial model, answering a customer questionnaire or assessing an exposed asset? The work and the evidence should fit that decision.
Connect the risk to a financial driver
A useful working schedule follows the path from a climate-related exposure to an operational effect and then to the financial records. For example:
| Potential exposure | Business effect to investigate | Finance work |
|---|---|---|
| More disruptive heat | Reduced productive hours or higher cooling needs | Labour productivity and energy cost assumptions |
| Flood exposure at a site | Damage, downtime or disrupted deliveries | Repair costs, lost contribution and recovery timing |
| Changing customer requirements | Different products, specifications or supplier selection | Revenue mix, margins and investment needs |
| A planned equipment transition | Replacement spending and changed operating costs | Capital expenditure, cash flows and asset lives |
These are possible pathways, not conclusions about a particular business. A climate specialist may provide hazard information or scenario assumptions. Operations staff explain the actual exposure and response. Finance translates the agreed inputs into a model and tests the implications.
Model the effect without counting it twice
Suppose an illustrative site interruption causes two additional lost trading days. If the expected lost contribution after avoidable costs is $28,000 per day, the initial model shows $56,000 before considering recoverable sales, insurance, extra recovery costs and other effects.
That calculation is not a climate forecast. It is a transparent financial sensitivity. The missing work is establishing whether the additional downtime assumption is reasonable for the site and scenario, and what management can actually recover.
A common modelling risk is deducting lost revenue and then deducting the same lost margin again, or leaving costs unchanged even where activity stops. Reconcile the calculation to the existing business forecast. Identify which costs are fixed, which can be avoided and which additional costs emerge during recovery.
Bring accounting judgements into the discussion
AASB S2 addresses current and anticipated financial effects as well as climate resilience. The standard includes provisions governing when quantitative information is required and circumstances where qualitative information may be appropriate. It should not be read as permission to insert an unsupported number or to avoid analysis whenever estimation is difficult. See AASB S2 Climate-related Disclosures.
Finance should consider how the work connects with existing accounting judgements: forecast cash flows, impairment indicators, useful lives, restoration obligations and other relevant estimates. The outcome depends on the facts and applicable accounting standards. A risk being mentioned in a climate report does not automatically create an impairment charge.
Keep an explanation where assumptions differ between models. A long-term scenario exercise and a near-term operating budget can serve different purposes, but unexplained contradictions make both harder to trust.
Make the evidence reviewable
Save the source, date, owner and rationale for each material assumption. Identify estimates, data gaps, limitations and sensitivity ranges beside the analysis they affect. Record management review and the version used for reporting.
ASIC’s May 2026 observations on early sustainability reports emphasised clear disclosure of judgements, assumptions and measurement uncertainty. A reader should be able to understand the basis of an important conclusion without piecing it together from unrelated documents.
For this specialist work, Target Advisory connects with Climate Accountants, which supports finance teams and sustainability advisers with financial impact pathways, scenario-linked modelling, accounting implications and evidence preparation. This is preparation and advisory support; any independent assurance engagement is separately scoped with the appropriate assurance provider.
A productive first session starts with one material exposure, the relevant operating data and the forecast already used to run the business. Build a defensible connection there, then extend the approach to the next decision.
Target Advisory 