Group 3 Is Coming: 1 July 2027

If your organisation meets at least two of the following thresholds — revenue of $50 million or more, gross assets of $25 million or more, or 100 or more employees — you fall into AASB S2 Group 3, and your first mandatory climate reporting period begins on or after 1 July 2027.

With Group 1 already reporting and Group 2 starting now (July 2026), the spotlight will shift to Group 3 entities next. This guide covers who qualifies, what you must disclose, and what you should be doing now to ensure you're audit-ready when the deadline arrives.

Who Qualifies for Group 3?

Group 3 captures mid-market entities meeting at least two of three criteria:

Revenue: $50 million or more in consolidated revenue
Assets: $25 million or more in consolidated gross assets
Employees: 100 or more employees

Unlike Groups 1 and 2, Group 3 entities are only required to disclose climate risks if they identify material climate-related risks or opportunities. If none are identified, a statement explaining why must be included. However, for any entity with significant property holdings, insurance exposure, or supply chain vulnerability, climate risk is almost certainly material.

The 12-Month Preparation Timeline

With the deadline 12 months away, here is the sequence of actions your organisation should take:

Now — Month 3: Foundation

Confirm your Group 3 status on a consolidated group basis using ASIC Regulatory Guide 280
Conduct a gap analysis against all four AASB S2 pillars: Governance, Strategy, Risk Management, and Metrics & Targets
Identify who owns climate risk oversight — this must be documented with specific roles and committees
Begin collecting Scope 1 and 2 emissions data from all operational sites

Months 3–6: Data Infrastructure

Implement a carbon accounting platform with full audit trail capability — spreadsheets will not satisfy Year 2 assurance requirements
Assess property-level physical climate risk across your owned and leased portfolio. ClimateNest provides deterministic 8-hazard reports for any Australian address
Begin climate scenario analysis using at least two temperature pathways: one aligned with 1.5°C, and one exceeding 2°C
Engage with suppliers to prepare for Scope 3 emissions data collection (required from Year 2)

Months 6–9: Reporting Preparation

Draft your Governance disclosures: which board committee oversees climate risk, how often it meets, and what processes are in place
Complete your Strategy pillar: how climate risk affects your business model, financial planning, and asset values
Prepare Risk Management documentation: how you identify, assess, and manage climate risks — including property-level physical risk
Document your methodology: which data sources you use, which scenarios you applied, and any key judgements or uncertainties

Months 9–12: Assurance Readiness

Engage an assurance provider (limited assurance required from Year 1 for Scope 1 and 2)
Run a trial disclosure cycle to identify gaps in data quality
Ensure the Directors' Declaration process is established — directors must sign off on the sustainability report
Finalise your first AASB S2-aligned sustainability report before the reporting period end

Which Property Risks Are Material for Group 3 Entities?

For property-intensive businesses, the most material climate risks typically include:

Flood risk — Over 520,000 Australian properties face high flood risk. Insurance premiums in high-risk areas have risen 80-120% since 2020
Bushfire risk — Approximately 5.6 million homes face some level of bushfire risk. BAL ratings affect construction costs and insurability
Extreme heat — Heat day frequency is increasing across all Australian cities, driving cooling costs and workplace safety risks
Coastal erosion and sea level rise — Combined value of coastal properties exposed to erosion damage in NSW alone is estimated at $25 billion
Insurance trajectory — APRA projects up to 1 million uninsured households by 2050. Property insurance availability affects collateral values and lending

What You Must Disclose

AASB S2 requires disclosure across four pillars. Group 3 entities that identify material climate risks must report on all four:

Governance: Board and management oversight of climate risks and opportunities — with specific roles, committee names, and meeting frequency
Strategy: How climate risks affect your business model, strategy, and financial planning — including scenario analysis under at least two temperature pathways
Risk Management: Processes to identify, assess, and manage climate risks — including property-level physical risk exposure
Metrics and Targets: Scope 1, 2, and 3 emissions, climate-related capital expenditure, internal carbon prices (if used), and any emissions reduction targets

How ClimateNest Supports Group 3 Preparation

ClimateNest provides deterministic, auditable property-level climate risk reports for any Australian address. Unlike AI-generated assessments that can hallucinate numbers, ClimateNest uses government data from BOM, CSIRO, Geoscience Australia, and ABS to compute scores across 8 hazards with current, 2030, and 2050 projections.

For Group 3 entities with property portfolios, ClimateNest offers:

Single property reports from A$69 for address-level due diligence
Portfolio screening from A$199 for multi-property risk assessment
Enterprise API access from A$499/month for integration with your reporting systems
REST API and MCP server for automated data ingestion into your sustainability platform

FAQ

Is AASB S2 Group 3 mandatory?

Yes, if you identify material climate-related risks or opportunities. If none are identified, you must include a statement explaining why. The standard carries the same legal weight as financial reporting under the Corporations Act 2001.

What are the penalties for non-compliance?

False or misleading climate statements can result in fines of up to $15 million or 10% of annual turnover. Directors can be held personally liable. A three-year modified liability period applies to Scope 3 and scenario analysis disclosures.

When does Group 3 reporting start exactly?

For entities with a 30 June financial year end, the first mandatory reporting period begins 1 July 2027, with the sustainability report due to ASIC by approximately October 2028. Entities with a calendar year end report from 1 January 2027.

This article is for informational purposes only and does not constitute legal advice. Seek independent legal advice on your obligations under AASB S2.

AASB S2 Group 3 Mandatory Climate Reporting: Your 12-Month Preparation Guide (2027 Deadline)