Australia / Guides / The Group 3 "no material risk" statement: what it actually requires
Australia · guideThe Group 3 "no material risk" statement: what it actually requires
The short answer
Section 296B of the Corporations Act 2001 lets an entity in Group 3 of the mandatory climate reporting phase-in — those with a financial year starting on or after 1 July 2027 — include a statement in place of full climate statements if it has determined, in accordance with AASB S2, that it has no material financial risks or opportunities relating to climate. The statement itself has two required parts: a declaration that there are no material climate-related financial risks or opportunities, and an explanation of how the entity reached that conclusion. Reaching it is not a formality — it means running the AASB S2 materiality process (screening physical and transition risks and opportunities against the entity's operations, value chain, and time horizons) and keeping the working file that shows the screening was done properly. The statement still sits inside the sustainability report, still needs a directors' declaration, and still goes to an AUASB-registered assurance practitioner for an auditor's report — so a "no material risk" outcome is a smaller reporting job, not an exemption from one.
Key facts — verified dates on each
Where this sits in the phase-in
Australia's mandatory climate reporting regime, introduced by amendments to Chapter 2M of the Corporations Act 2001, phases entities in across three groups based on the size thresholds in section 292A: consolidated revenue, consolidated gross assets, and employee headcount, with an entity caught if it meets at least two of the three. Group 1 entities (the largest, plus NGER reporters above the NGER threshold) started with financial years from 1 January 2025. Group 2 follows from 1 July 2026. Group 3 — entities meeting the default thresholds of $50 million consolidated revenue, $25 million consolidated gross assets, or 100 employees (any two of three) — starts with financial years commencing on or after 1 July 2027, meaning first reports land in 2028.
Every entity caught by section 292A must prepare a sustainability report containing climate statements that comply with the disclosure requirements in section 296D and the sustainability standards (AASB S2). Section 296B is the one carve-out inside that structure: it lets an entity substitute the two-part "no material risk" statement for the full climate statements, but only where the underlying materiality determination genuinely supports it.
What the assessment must actually cover
The determination of "no material financial risks or opportunities relating to climate" is made in accordance with AASB S2, not by a director's gut read of the business. AASB S2 asks an entity to identify climate-related physical risks (acute events like flood or fire, and chronic shifts like heat stress or changing rainfall patterns) and transition risks (policy, legal, technology, market, and reputation shifts as the economy decarbonises), plus any climate-related opportunities, across the entity's own operations and its upstream and downstream value chain, over short, medium, and long time horizons.
A genuine "no material risk" conclusion means that screening was run and nothing that surfaced crossed the entity's materiality threshold — not that the screening was skipped because the business "isn't really exposed." ASIC's regulatory guidance (RG 280) frames the statement as available to entities that have done the assessment and can show their basis for the conclusion, and the working file behind it — what was screened, what materiality threshold was applied, and why each risk and opportunity fell below it — is the record a director actually signs off on and an assurance practitioner actually tests.
Entities with genuinely low climate exposure — a services business with a small office footprint and a domestic supply chain, for instance — are the more likely candidates for a supportable "no material risk" conclusion. An entity with any material physical-asset exposure, an emissions-intensive supply chain, or a transition-sensitive product line is unlikely to land there, and forcing the statement in that case creates the assurance and directors'-duties exposure it was never meant to shortcut.
The statement itself: two required parts
Where an entity determines it has no material climate-related financial risks or opportunities for the financial year, section 296B specifies what the statement in place of full climate statements must contain: a statement that there are no material financial risks or opportunities relating to climate for the entity, and a statement explaining how the entity determined that. The second part is where the assessment work becomes visible on the page — a bare assertion without an explanation of the basis does not meet the section.
- The materiality conclusion itself, stated plainly
- The explanation of how the entity reached it — the screening performed, against what boundary and time horizons
Director sign-off and the auditor's report that still attaches
The Group 3 statement is not a document that sits outside the sustainability report — it is filed as part of it, alongside any notes and the directors' declaration required under the Act. For financial years from 1 January 2025 to 31 December 2027, directors declare that they have taken reasonable steps to ensure the sustainability report (other than the declaration itself) is in accordance with the Corporations Act and AASB S2; a fuller-form declaration, comparable to the one directors already give for the financial report, applies from 2028. Either way, a director is putting their name to the conclusion that no material climate risk exists — which is why the underlying assessment file matters as much as the two sentences that end up on the page.
The statement is also subject to assurance. Climate-related financial disclosures under the Corporations Act are assured to a limited-assurance standard from an entity's first reporting year, under the AUASB's ASSA 5000 and ASSA 5010 standards, stepping up to reasonable assurance — the standard applied to a full financial audit — from an entity's fourth reporting year. An AUASB-registered assurance practitioner still forms and issues an assurance conclusion on a Group 3 "no material risk" statement; the practitioner is testing whether the materiality determination was reasonably arrived at and adequately explained, not simply accepting the entity's word for it.
Why "no material risk" is a real, if smaller, exercise
Publishing the short-form statement removes the work of drafting full climate statements against every AASB S2 disclosure requirement — governance, strategy, risk management, metrics and targets, and Scope 1, 2, and 3 emissions. It does not remove the requirement to run the materiality assessment that justifies making that call, to document it in a form directors can rely on and an assurance practitioner can test, or to carry it through director sign-off and an assurance engagement each year the conclusion is repeated. Treating the statement as a box-ticking exemption — reached without a documented screening process — is the scenario ASIC's guidance and the assurance standards are built to catch, and it is where directors' duties exposure sits if a material risk later turns out to have been missed rather than genuinely absent.
The figures, and when we checked them
These numbers change by year or by notification. Each one shows the date we last verified it against the source — if that date looks old, check the source before relying on it.
Questions on this
What is the Group 3 "no material risk" statement?
A short-form statement, permitted under section 296B of the Corporations Act 2001, that a Group 3 entity can publish instead of full climate statements once it has determined, under AASB S2, that it has no material climate-related financial risks or opportunities for the year.
Which entities are in Group 3?
Entities that meet at least two of the default section 292A size thresholds — $50 million consolidated revenue, $25 million consolidated gross assets, or 100 employees — and were not already caught in Group 1 or Group 2. Group 3's reporting obligation starts with financial years commencing on or after 1 July 2027.
Does the statement mean the entity skips the climate assessment entirely?
No. The entity still has to run the AASB S2 materiality process across physical risks, transition risks, and opportunities, over its operations and value chain and across short, medium, and long time horizons, and document how it reached a "no material risk" conclusion. The statement is shorter to write; the underlying work is not skipped.
What does the statement have to contain?
Two elements required by section 296B: a statement that there are no material financial risks or opportunities relating to climate for the entity, and a statement explaining how the entity determined that. A conclusion without an explained basis does not satisfy the section.
Do directors still have to sign off on it?
Yes. The statement is filed as part of the sustainability report, which carries a directors' declaration under the Corporations Act. For financial years up to 31 December 2027 that declaration covers reasonable steps taken to ensure compliance; a fuller declaration applies from 2028.
Does an auditor still need to look at it?
Yes. Climate-related disclosures under the Corporations Act, including a Group 3 "no material risk" statement, are subject to assurance by an AUASB-registered practitioner — limited assurance from the entity's first reporting year under ASSA 5000/ASSA 5010, moving to reasonable assurance from the fourth reporting year.
Which entities are realistic candidates for a "no material risk" conclusion?
Entities with genuinely limited climate exposure — for example, a services business with a modest physical footprint and a domestic supply chain. Entities with material physical-asset exposure, an emissions-intensive supply chain, or transition-sensitive products or markets are unlikely to reach a supportable "no material risk" conclusion under AASB S2 screening.
Can the same conclusion be reused next year, or does the assessment start over?
The statement covers one reporting period, so the conclusion has to be reached — and be supportable — each financial year. In practice the second year is far lighter if the first year’s screening file was built properly: the entity updates the assessment for what changed (new sites, new products, supply-chain shifts, customer requirements) rather than rebuilding it, and the directors sign against the refreshed file. A material change mid-stream, like an acquisition with physical-asset exposure, is exactly the trigger that can turn next year’s short-form statement into a full report.
Primary sources
- Federal Register of Legislation — Corporations Act 2001, section 292A (Who has to prepare annual sustainability reports)
- Federal Register of Legislation — Corporations Act 2001, section 296B (Contents of climate statements — statement about there being no financial risks or opportunities relating to climate)
- ASIC — Who must prepare a sustainability report?
- AUASB — Climate and sustainability assurance requirements
- ASIC — Regulatory Guide 280: Sustainability reporting
Last reviewed 2026-08-15. Statutes and schedules change — the sources above are authoritative, this page is orientation.
Want this handled rather than read about?
A scoping call decides what fits. We are a consulting firm — lodgments and agent work run through registered BAS and tax agents. Whoever signs and files stays yours.