In 2024, 38 per cent of companies included climate risks in their financial statements, up from 18 per cent in 2021, a joint report by CA ANZ, the University of Melbourne, the University of Queensland, and the Australian Accounting Standards Board (AASB) found.

“Despite the ebbs and flows of global politics, climate risk continues to have a financial impact that is playing out in company financial statements,” Simon Grant, CA ANZ’s group executive for advocacy, said.

“In the year that we saw mandatory disclosure of non-financial climate risk commence, we can also see the growing importance of financial reporting of climate risk, and both threads are vitally important to deliver a clear view for investors.”

The rising ubiquity of climate risk reporting will raise awareness of the financial risks that climate change poses for businesses.

“These results demonstrate for investors that climate is not just an ethical or principled consideration, but one that carries a heavy and increasing financial significance,” AASB chair and CEO, Dr Keith Kendall, said.

“This underscores the importance of consistent, comparable and investor-focused disclosures for decision-making, and the role of strong standards and well-trained accountants in planning, preparing and auditing these disclosures.”

In Australia, energy and industrial companies have taken the lead in climate risk disclosures. In 2024, 100 per cent of Australian utilities companies disclosed climate risks in their financial statements.

Globally, 75 per cent of utilities companies reported their climate risks in 2024, up significantly from 27 per cent in 2021.

Climate risks are reflected in company financial statements in a variety of ways. These include potential asset impairment (38 per cent), critical accounting estimates (22 per cent), and estimating the useful lives of assets (13 per cent).

The report found that climate change impacts, including altered weather patterns and extreme weather events, have financial implications for company operations, assets and financing.

Accountants will have a key role in ensuring climate risk disclosures are compliant with relevant legislation, and in guiding companies through the process of accounting for their climate risks.

“Accountants play an important role in sustainability and climate reporting that enables investment and business decision-making. It’s about the long-term environmental impact, and for many companies, reporting on their ambitions to reach a net zero position,” Grant said.