The Australian Sustainability Reporting Standards (ASRS), developed by the Australian Accounting Standards Board (AASB), are transforming how companies in Australia account for and disclose climate-related information. Modelled closely on the ISSB’s IFRS S1 and S2 standards, the ASRS aims to align domestic reporting with global expectations while ensuring relevance to the Australian market. As these standards become mandatory, companies in the finance sector face both complex challenges and unique opportunities in adapting to this new reporting landscape.
Financial institutions including banks, insurers, asset managers, and superannuation funds are under increased scrutiny, not only for their own emissions but also for their role in financing emissions across the economy. For a sector that sits at the heart of capital allocation and risk management, this is more than just a compliance exercise. It's a chance to redefine how sustainability and climate risk are embedded into core business operations.
Understanding the ASRS requirements for finance
The ASRS requires financial companies to disclose climate-related financial risks and opportunities across governance, strategy, risk management, and metrics and targets. This mirrors the ISSB’s focus but is tailored for Australian legal and economic conditions.
For finance sector entities, this includes reporting on financed emissions (Scope 3, Category 15 under the GHG Protocol), representing the emissions associated with loans, investments, and insurance underwriting. In many cases, these financed emissions are orders of magnitude larger than operational emissions (Scope 1 and 2), creating a major reporting burden and requiring access to high-quality, granular data.
This is where the complexity starts to ramp up. Financial institutions must look through their portfolios, across multiple asset classes and geographies, to assess and quantify emissions exposure. Moreover, under ASRS, companies need to disclose how climate risks influence their business strategies, risk assessments, and performance targets, all of which require integrated, scenario-based analysis.
The data and methodology hurdle
A core challenge for finance companies under ASRS is the reliability and completeness of emissions data, particularly for private, SME, or emerging market investments. This is compounded by methodological uncertainty. The Partnership for Carbon Accounting Financials (PCAF) provides guidance for calculating financed emissions, but applying it consistently across diverse portfolios can be a logistical headache.
Many institutions face decisions around data estimation, proxy use, and selecting the most appropriate attribution method (e.g., EVIC, AUM, outstanding balance). Given the ASRS’s emphasis on transparent methodology and data quality scoring, companies need to clearly disclose how estimates were derived and the limitations of their approach.
Platforms like Avarni can reduce friction here by automating emissions estimation using the most current and appropriate emissions factors, while flagging data quality issues across portfolio assets. It can also provide ready access to the estimated emissions of thousands of different types of assets, such as vehicles (with over 17,000 car makes and models readily available), buildings (with over 2,000 Australian address-specific factors) and electronic equipment. The ability to centralise, trace, and update emissions data in one place not only streamlines compliance, but also supports more consistent disclosures year-on-year.
Embedding climate risk in financial decision-making
ASRS pushes financial institutions beyond disclosure and into strategic integration. The standards call for companies to assess how climate risks (both physical and transition) affect their business models, asset values, and financial performance. For financial firms, this means embedding climate scenario analysis into investment due diligence, underwriting, and credit risk processes.
The opportunity here lies in building climate intelligence directly into capital allocation decisions. Those who move early can identify underpriced climate risk, avoid stranded assets, and invest in companies well-positioned for a low-carbon transition.
However, scenario analysis is still new territory for many firms. It requires consistent assumptions, modelling capabilities, and internal expertise. Avarni’s ability to translate emissions data into scenario-aligned projections, such as assessing portfolio alignment to 1.5°C or 2°C pathways, can help institutions start to operationalise these insights without building a bespoke analytics engine from scratch.
Meeting stakeholder expectations
Beyond regulatory compliance, ASRS-aligned reporting will shape how stakeholders including investors, regulators, customers, and civil society perceive a financial institution’s climate credibility. Finance companies are expected to lead by example, not only in managing their own climate risks but in enabling the decarbonisation of the broader economy.
This creates reputational upside for institutions that can demonstrate proactive climate strategies, credible emissions reductions, and transparency in reporting. Those that fall behind, by contrast, risk investor pressure, capital flight, and regulatory scrutiny.
This is where technology platforms like Avarni offer a strategic edge. Not by simply "checking the box" on reporting, but by enabling finance firms to track financed emissions, set credible reduction targets, and share scenario-aligned insights with stakeholders, all from a single, auditable platform.
Building internal capability and governance
ASRS will also require strong governance around sustainability reporting, including board-level oversight and internal controls over climate-related disclosures. Financial institutions, many of which already operate under strict governance standards, will need to extend this rigour to climate data and risk management.
This involves cross-functional collaboration between sustainability teams, finance, risk, and IT. Companies must ensure that climate disclosures are not only accurate but also decision-useful, consistent with financial filings, and subject to the same level of scrutiny as financial data.
The internal uplift in capability will take time. But forward-looking firms can use the ASRS transition period to build scalable data systems, train staff, and embed sustainability into enterprise risk frameworks. Avarni can support this transition by serving as a centralised platform for climate data management, improving traceability and reducing manual effort.
Summary
- Understanding the ASRS requirements for finance: ASRS requires finance companies to report on climate governance, strategy, risk, and metrics, especially Scope 3 financed emissions. This adds pressure to quantify emissions at scale across complex portfolios.
- The data and methodology hurdle: Accessing reliable emissions data and applying consistent methodologies (like PCAF) is a major challenge. Avarni helps streamline this by automating data collection, estimation, and quality tracking, and providing readily accessible estimation factors for over 17,000 vehicle makes & models, 2,000 Australian office addresses, and more.
- Embedding climate risk in financial decision-making: ASRS encourages scenario-based climate risk analysis, pushing financial institutions to integrate climate considerations into investment and lending decisions. Avarni supports this with built-in scenario alignment capabilities.
- Meeting stakeholder expectations: Transparent, consistent disclosures will shape public and investor trust. Financial institutions that lead on ASRS reporting can strengthen credibility and competitive positioning.
- Building internal capability and governance: Finance companies will need to establish robust governance for climate disclosures, integrating sustainability into their risk and reporting frameworks. Avarni supports this by acting as a centralised, auditable source of climate data.
By embracing the ASRS as more than a compliance exercise, Australian financial institutions can turn sustainability reporting into a lever for strategic advantage. With the right tools and processes in place, this is a chance to lead the economy through the net-zero transition, not just report on it.
