In December 2025, the AASB released Amendment AASB 2025-1, introducing targeted updates to AASB Sustainability Standard 2 (AASB S2). These changes focus specifically on how entities report and classify certain types of greenhouse gas (GHG) emissions, with an emphasis on Scope 3 disclosures and jurisdictional flexibility.
While the core structure of AASB S2 remains intact, these amendments provide important relief and clarification for financial institutions and entities operating across multiple jurisdictions. Here’s what’s changed, and what reporting entities need to know.
Clarified treatment of category 15 Scope 3 emissions
The most significant update is a clarification of how entities should treat Category 15 Scope 3 emissions ("investments"), which are particularly relevant for financial institutions.
Under the amendment, entities are now explicitly permitted to limit their measurement and disclosure of Category 15 emissions to financed emissions only. This means they are not required to include emissions from other financial activities, such as:
- Facilitated emissions from investment banking activities
- Emissions associated with insurance and reinsurance underwriting
This clarification narrows the reporting scope for institutions that may have been uncertain about how far their emissions accounting obligations extended. For many financial institutions, it helps focus Scope 3 Category 15 disclosures on the most material and measurable component: financed emissions.
Flexibility in industry classification for financed emissions
The amendment also removes the mandatory requirement to use the Global Industry Classification Standard (GICS) when disaggregating financed emissions by sector. Instead, entities involved in commercial banking or insurance-related financial activities can now choose any industry-classification system that enables them to provide useful information about their exposure to climate-related transition risks.
This shift away from a prescriptive framework allows preparers to align disclosures with the classification systems already used in their internal risk management or portfolio reporting. It also gives flexibility to report emissions in a way that better reflects actual exposure to climate risk, rather than simply aligning with a one-size-fits-all taxonomy.
Relief from using the GHG Protocol in jurisdictions with conflicting requirements
The original version of AASB S2 required entities to measure their emissions in line with the GHG Protocol: A Corporate Accounting and Reporting Standard (2004). The amendment introduces important relief in situations where jurisdictional authorities or stock exchanges require a different method.
Now, entities are allowed to use an alternative GHG accounting method, but only for the part of the entity to which the jurisdictional or exchange-level requirement applies. This is especially relevant for organisations reporting emissions under the NGER scheme, who may already be reporting Scope 1 & 2 emissions for certain facilities that meet the thresholds. This is also relevant for multinational organisations that may be listed in multiple markets or subject to regional disclosure rules (such as those in the EU, US, or Asia).
While the GHG Protocol remains the baseline, this update offers welcome flexibility and avoids duplication where local regulations already mandate another emissions accounting method.
Flexibility in applying global warming potential (GWP) values
Similarly, AASB S2 originally required entities to use 100-year global warming potential (GWP) values from the latest Intergovernmental Panel on Climate Change (IPCC) assessment available at the reporting date. As of the publishing of this blog post, the latest assessment is AR6.
The amendment introduces relief from this requirement, allowing entities to use alternative GWP values, but again, only where jurisdictional authorities or exchanges mandate them, and only for the part of the entity affected by those rules.
This allows companies to align with local regulatory frameworks (such as Australia’s Safeguard Mechanism or other compliance schemes that may use fixed GWP values such as AR4 or AR5) without needing to reconcile two different sets of numbers for the same emissions.
What this means for reporting entities
These amendments are targeted, but meaningful. They respond to some of the more complex implementation challenges facing large or multi-jurisdictional companies, particularly financial institutions. The key takeaway is that AASB is maintaining alignment with global standards, but making space for practical flexibility where other regulatory frameworks are already in place.
For preparers, this means:
- If you're a bank or insurer, you can focus Scope 3 Category 15 reporting on financed emissions only.
- You no longer have to use GICS to classify financed emissions. Choose the system that best reflects your exposure to transition risk.
- If you're subject to different GHG methods or GWP values due to jurisdictional rules, you can follow those requirements, but only for the relevant part of your organisation.
This helps avoid reporting duplication and allows for smoother integration of local and global sustainability frameworks.
Summary
- Scope 3 Category 15 emissions can now be limited to financed emissions only, excluding emissions from underwriting or facilitated financial activities.
- Financial entities can choose their own industry classification system to report financed emissions by sector, rather than being required to use GICS.
- Relief is provided from using the GHG Protocol, where a jurisdiction or stock exchange mandates another method such as NGER, but only for the applicable part of the entity.
- Alternative GWP values may be used, if required by a local authority or exchange, again only for the relevant part of the entity.
How Avarni can help
Understanding and navigating Scope 3 requirements is no small task. Avarni helps you streamline emissions accounting across Scope 1, 2, and 3, with the flexibility to align your reporting with jurisdictional and regulatory requirements.
Our platform supports emissions classification by any sectoral system you choose, and can help isolate financed emissions from other activities. Whether you're reporting under AASB S2 or aligning with international frameworks, Avarni gives you the tools to do it right, and do it faster.
Get in touch to see how Avarni can support your Scope 3 disclosures under AASB S2.
