Carbon Emissions Reporting for Financial Services and Superannuation Funds

The financial services sector is no longer a passive observer in the transition to a low-carbon economy it is a central driver. Through lending, investment, and capital allocation decisions, banks, asset managers, and superannuation funds influence emissions outcomes across the global economy.

As a result, regulators are rapidly increasing expectations for climate transparency. From 2025–2026, mandatory climate-related financial disclosures under frameworks such as the Australian Sustainability Reporting Standards and AASB S2 will apply to large financial institutions and super funds.

For these organisations, emissions reporting is fundamentally different from other sectors. The majority of emissions sit not within operations, but within investment and lending portfolios commonly referred to as “financed emissions.” This creates both a strategic challenge and a significant opportunity.

This article outlines the key requirements, challenges, and practical steps financial institutions must take to prepare for the 2026 reporting landscape.

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Why Climate Reporting Matters for Financial Institutions

Investor Trust and Market Confidence

Transparency is now a prerequisite for trust. Investors, regulators, and members expect financial institutions to clearly articulate how climate risk is embedded within their portfolios.

Failure to provide credible disclosures can lead to:

• Loss of investor confidence
• Increased scrutiny from regulators
• Reduced competitiveness in capital markets

Regulatory Compliance

Climate reporting is becoming mandatory, not voluntary. Under frameworks such as Australian Sustainability Reporting Standards, financial institutions must disclose:

• Portfolio-level emissions
• Climate-related risks and opportunities
• Governance and oversight mechanisms

Portfolio Risk Management

Climate change presents both physical and transition risks that directly impact asset valuations. Financial institutions must understand:

• Exposure to high-emissions sectors
• Vulnerability to regulatory changes
• Impact of climate scenarios on portfolio performance

Fiduciary Duty and Reputation

For superannuation funds in particular, climate risk is increasingly viewed as a fiduciary issue. Trustees are expected to act in the best financial interests of members, which includes managing long-term climate-related risks.

Reputation also plays a critical role. Institutions seen as lagging on climate transparency may face:

• Member attrition
• Negative media attention
• Stakeholder pressure

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Main Sources of Emissions in Financial Services

Unlike energy or industrial sectors, financial institutions generate relatively low operational emissions. Instead, their emissions profile is dominated by indirect exposures.

Financed Emissions

Financed emissions—those associated with loans, investments, and underwriting activitiesare typically the largest component of a financial institution’s carbon footprint.

These emissions arise from:

• Corporate lending portfolios
• Equity and debt investments
• Project finance and infrastructure funding

Investment Portfolios

Superannuation funds and asset managers must account for emissions across diversified portfolios, including:

• Listed equities
• Fixed income
• Private markets

Property Assets

Direct property holdings contribute to Scope 1 and Scope 2 emissions through:

• Energy use in buildings
• Facility operations

Operational Emissions

While smaller in scale, operational emissions still require reporting and include:

• Office energy consumption
• Business travel
• IT infrastructure

Service Providers and Value Chain

Scope 3 emissions also extend to service providers, including:

• Fund administrators
• Custodians
• External managers

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2026 Reporting Requirements: What Financial Institutions Must Disclose

From 2026, financial institutions will be required to meet enhanced climate disclosure obligations under AASB S2.

Portfolio Emissions Reporting

Institutions must measure and disclose financed emissions across their portfolios. This includes:

• Attribution of emissions based on ownership or exposure
• Coverage across asset classes
• Transparent methodologies

Climate Risk and Scenario Analysis

Organisations must assess and disclose how climate scenarios impact their portfolios, including:

• Transition risks (e.g. policy changes, carbon pricing)
• Physical risks (e.g. extreme weather events)
• Financial impacts under different scenarios

Governance and Strategy

Boards and executive teams are expected to demonstrate:

• Oversight of climate-related risks
• Integration into investment decision-making
• Alignment with long-term strategy

Alignment with Global Standards

Disclosures must align with frameworks such as the Greenhouse Gas Protocol, ensuring consistency and comparability across markets.

Common Challenges for Financial Institutions

Measuring Financed Emissions

Financed emissions are inherently complex to measure. Challenges include:

• Attribution methodologies across asset classes
• Limited availability of emissions data from investees
• Reliance on proxies and estimation models

Data Availability and Quality

Many investee companies—particularly in private markets—do not disclose emissions data. This creates:

• Data gaps
• Inconsistent reporting
• Increased reliance on assumptions

Portfolio Complexity

Diversified portfolios introduce complexity in:

• Aggregating emissions data
• Ensuring consistency across asset classes
• Managing different reporting standards

Regulatory Interpretation

As frameworks such as Australian Sustainability Reporting Standards evolve, institutions face uncertainty in:

• Interpreting requirements
• Applying methodologies
• Ensuring audit readiness

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How to Prepare for 2026 Reporting

Map Portfolio Exposure

The first step is to understand where emissions sit within the portfolio. This involves:

• Mapping investments across sectors and geographies
• Identifying high-emissions exposures
• Prioritising material risks

Establish Data Collection Frameworks

Financial institutions must build structured approaches to data collection:

• Engaging with investee companies
• Standardising data requests
• Leveraging third-party data sources

Develop Risk Assessment Models

Robust climate risk assessment requires:

• Scenario modelling capabilities
• Integration with financial analysis
• Alignment with enterprise risk management frameworks

Implement Reporting Systems

Manual processes are no longer sufficient. Institutions need:

• Integrated reporting platforms
• Automated calculations and data aggregation
• Audit trails and documentation

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How Fair Supply Supports Financial Institutions

As climate reporting requirements expand, financial institutions need solutions that go beyond basic data aggregation.

Fair Supply provides a purpose-built platform designed to address the unique challenges of financed emissions and portfolio reporting.

Financed Emissions Measurement

Fair Supply enables:

• Calculation of financed emissions across asset classes
• Use of advanced modelling to fill data gaps
• Alignment with recognised standards such as the Greenhouse Gas Protocol

Portfolio Reporting Platform

The platform provides:

• Consolidated portfolio-level emissions reporting
• Real-time insights into emissions exposure
• Scenario analysis capabilities

Data Integration and Intelligence

Fair Supply integrates:

• Internal portfolio data
• External emissions datasets
• Supply chain modelling to enhance accuracy

Expert Compliance Support

In addition to technology, Fair Supply offers:

• Guidance on regulatory interpretation
• Support for disclosure preparation
• Audit-ready outputs aligned with AASB S2

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Fair Supply's Carbon Emission Reporting Software Can Help

Climate reporting is now a core component of governance for financial institutions and superannuation funds. With mandatory disclosures coming into effect from 2025–2026, organisations must act quickly to build robust, transparent, and auditable reporting capabilities.

The implications extend beyond compliance. Climate transparency directly impacts investor trust, capital allocation, and long-term performance.

Institutions that invest in high-quality data, integrated systems, and clear governance frameworks will be best positioned to navigate this transition.

Fair Supply enables this shift—providing the tools, data, and expertise required to deliver reliable, decision-useful climate disclosures in an increasingly complex regulatory environment.

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