AMP’s first climate disclosure under Australia’s mandatory reporting regime quantifies no financial impact. It addresses vulnerability in prose, without a dollar figure or percentage attached. This from one of Australia’s largest wealth managers, whose revenue rises and falls with the value of assets under management. If those assets are damaged by floods, fires, or the repricing of carbon-intensive industries, revenue declines proportionally.

So AMP acknowledges the exposure but won’t put a number on it, in a land of droughts and flooding rains? One can almost see the board and its lawyers in conversation, landing on the point of principle: say as little as possible while technically meeting the standard. The report reads less like a climate risk assessment than an exercise in prophylactic compliance.

From 1 January 2025, large Australian entities began their first reporting periods under AASB S2, Australia’s mandatory climate disclosure standard and the local expression of IFRS S2. The first reports are now public, and most directors do not understand the science behind what they have just been asked to do.

Let’s take a brief detour into ecology. Stay with me. It is the key to understanding what the standard is asking of you, and why most reports will satisfy the lawyers and miss the point entirely. At its core, AASB S2 draws on resilience science, a discipline developed by Canadian ecologist Buzz Holling in 1973 to explain how the systems we depend on – economies, ecosystems, societies – move through cycles of growth, accumulation, decay, and renewal.

Holling’s central insight was that complex systems do not exist in a fixed state. Instead, they are characterised by constant change and tipping points. The self-contained balance sheet where the ledger is always squared and all things are known is an illusion. Functioning ecosystems survive because they balance two competing forces: efficiency and resilience. Ecologists call this range the window of vitality. Stray too far toward efficiency and the system becomes brittle. Overinvest in resilience and it stagnates. The companies that endure are those that hold the tension between the two.

Most companies do not hold this tension. They optimise relentlessly for cost and efficiency, because quarterly earnings cycles, bonus structures, and investor expectations all penalise the long view. Flexibility, diversity, the capacity to learn and adapt: these are treated as optional at best and wasteful at worst. As Nassim Taleb warns, never cross a river that is on average four feet deep.

IFRS S2 was created to correct this imbalance. Its scenario analysis requirement does not ask companies to predict the future. It asks them to rehearse how they will act when the future arrives differently than expected. Investors do not want to read a claim that your business is resilient. They want to test the quality of your thinking.

After the Global Financial Crisis, institutional capital recognised that portfolios had grown too large to diversify away from systemic risk. Climate, like the governance failures that enabled the crisis, was not a preference but an exposure. Large asset owners had internalised the window of vitality. They were willing to accept a basis point or two less upside to reduce the risk of catastrophic wipeout. The standards were built accordingly.

The IFRS Foundation prioritised comparability over decision-usefulness, because investors want to judge which companies in a peer group are thinking seriously about climate risk and which are not. The unintended consequence is a race to the comparable minimum.

Directors, meanwhile, do not operate on what regulators say; they disclose what their lawyers advise, and the advice is clear: say less, hedge more. The assurance industry has a direct commercial incentive to frame sustainability as compliance. The same firms that advise on implementation generate recurring revenue from the assurance the standards require. When the sustainability function is consumed by data collection, strategic thinking atrophies. Almost every sustainability role advertised in the ASX100 right now is compliance-centric.

The political environment has compounded the problem. In 2021, BlackRock supported around 47 per cent of environmental and social shareholder proposals. By 2025, that figure had collapsed to less than 2 per cent. Larry Fink said the term ESG had become “politicised.” Battered by the optics of Trump’s war on woke, the public line moved – but not as much as many assume. BNP Paribas surveyed 420 asset owners and managers representing $34 trillion in assets under management last year. Eighty-seven per cent said their sustainability objectives are unchanged. Investors care about climate change. They’ve just stopped saying so out loud.

The silence has eroded the strategic thinking the standards were designed to develop. Take oil giant Santos. Its first report runs to dozens of pages, much of it immaterial, burying the fact that matters: its strategy depends on carbon capture and storage at volumes far beyond anything yet demonstrated, and on direct air capture technology that remains commercially unproven. It is there, but you have to want to find it. Volume functions as camouflage.

Different intent produces different results. Viva Energy’s report provides clear summaries of risks and opportunities, quantifies anticipated financial effects where possible, and explains where it cannot. A fossil fuel refiner, it voluntarily discloses Scope 3 emissions including use of sold product. Its claim of immaterial physical risk deserves scrutiny – a refining and terminal network stretched along Australia’s eastern seaboard faces obvious exposure to storm surge, fire weather, and extreme heat – but the quality of its thinking is a different order from its peers.

Pepper Money, a smaller non-public reporter, quantifies climate risk exposure in dollar terms under both high- and low-emissions scenarios. It details the actions it is taking and explains how they are funded. Its report is, candidly, embarrassing for AMP.

AMP, Santos, Viva, and Pepper Money all reported under the same standard. The variable is strategic ambition. Greenhushing may be a rational response to a political environment that punishes candour and rewards silence. But a board that hides its best thinking to avoid scrutiny is no longer doing strategy. It is managing personal liability and hoping the activists look elsewhere.

The standard is built on science, and climate is the starting point. The same systems thinking applies to any source of systemic uncertainty: nature, AI, pandemics, resource scarcity, geopolitics. AASB S1, currently voluntary, already provides the framework. The boards that use it will build adaptive capacity. The rest will file their reports, satisfy their lawyers, and never learn to think clearly under uncertainty.

About the Author

Luke Heilbuth is CEO of sustainability strategy consultancy BWD Strategic, and a former Australian diplomat. 

On Substack, Luke writes about the systems we’re breaking and the blindness that lets us — from climate and geopolitics to AI and the future of work. Read & Subscribe on Substack here.