What the directors’ declaration actually says — and what ASIC RG 280 expects before signing

This is no longer a simple review-and-approve exercise. It is a declaration, and one that requires directors to stand behind forward-looking assumptions about the future viability of the business. As the Australian Securities and Investments Commission makes clear through RG 280, directors may rely on the special knowledge of management and external experts, but that reliance does not transfer responsibility. They must still exercise care, apply judgement, and bring a critical lens to the substance of what is being disclosed.

That is where many organisations are still working through what this really means in practice.

Reliance does not remove accountability

In most organisations, significant work is already underway. Sustainability teams are developing narratives, advisors are supporting scenario modelling, and data is being gathered from across the business. From a Board perspective, it can feel as though the right structures are in place and that the organisation is progressing well.

However, the expectation set out in RG 280 is quite clear. Directors can rely on expertise, but they cannot outsource accountability.

As we often say in Board sessions, you are no longer signing off on historical performance — you are signing off on forward-looking assumptions about the future viability of your business. The question is not whether you are right, but whether your process is defensible under scrutiny.

That shift is subtle, but it fundamentally changes the nature of what is being signed.

What a “critical lens” actually looks like

A critical lens is often interpreted as reading the report carefully and ensuring it is well written and coherent. In practice, it requires something quite different. It is less about the document itself and more about whether the underlying story holds together when it is challenged.

Directors are not expected to rebuild models or replicate analysis, but they are expected to understand enough to ask the right questions and to recognise when the answers do not fully stack up. Questions such as where climate risk is actually reflected in the financial model, or whether the organisation could defend its position in front of auditors or investors, become central to that process.

These are not technical questions. They are judgement questions, and they go directly to whether the disclosure reflects how the business is actually being run, rather than sitting alongside it as a parallel narrative.

Governance is not a structure — it is a system

One of the most common misunderstandings in climate reporting is the way governance is described. It is often framed in terms of committees, reporting lines and formal oversight structures, which creates the impression that governance is something static.

Under AASB S2, that is not the case.

Governance operates as a system. It is visible in how decisions are made, how assumptions are formed, how those assumptions are challenged, and how that challenge is ultimately evidenced. This is what transforms climate reporting from narrative into something that can stand up in the Boardroom and, importantly, under audit.

That system needs to flow through the organisation. It begins with Board oversight, but it must extend into executive ownership, operational data, and the way information is brought back into reporting, challenge and review. The distinction here is important, because having governance structures in place is not enough. What matters is whether those structures are actually operating in a way that is visible and defensible.

The governance cycle — what scrutiny will really test

In practice, governance under climate reporting behaves much more like a cycle than a structure. It starts with clear mandates and accountability, moves into capability and understanding, and is then reflected in reporting cadence, escalation of issues and decision-making. From there, it loops back through review, challenge and continuous improvement.

This is not a one-off exercise that can be completed and set aside. Climate risk evolves, assumptions evolve, and expectations evolve alongside them. Governance needs to keep pace with that change.

When scrutiny is applied, this is what will be tested. Not whether governance exists on paper, but whether the system is operating, whether challenge is evident, and whether decisions can be traced through to the final disclosure.

Where directors are most exposed

In most cases, exposure does not come from what is written in the report itself. Disclosures can read well, align with market language and appear complete at a high level.

The pressure tends to emerge when the underlying logic is examined more closely.

This is where gaps become visible, whether through assumptions that have not been clearly articulated, scenario outputs that are not fully understood, or a disconnect between the narrative being presented and the financial implications that sit behind it. When those questions are asked, the issue is rarely that the disclosure is incorrect. It is that the organisation cannot clearly explain how it arrived at that position.

That is why a simple question becomes so powerful: if an auditor walked in today, could we defend this?

The CFO’s role in bridging the gap

This is where the role of the CFO becomes critical.

Climate reporting is no longer just about producing disclosures. It is about ensuring that the Board has the confidence to stand behind them. That requires translation, turning technical work into something that is understandable and challengeable at Board level, and integration, ensuring that climate assumptions are reflected in financial models, asset lives, cashflows and capital allocation decisions.

If climate does not show up in the financial model, the disclosure will struggle to stand up under scrutiny, because it will appear disconnected from the way the business is actually being managed.

How directors get comfortable signing under uncertainty

One of the most common questions raised in Board discussions is what happens if the number is wrong.

It is a valid concern, particularly given the inherent uncertainty in climate-related financial estimates. Outcomes may differ materially from what is disclosed today, and in many cases that is unavoidable.

However, the declaration is not asking Directors to certify precision. It is asking them to stand behind the process.

Directors are not declaring that a number will be correct. They are declaring that it represents the organisation’s best, evidence-based view, built through a process that can be explained, challenged and repeated. This is entirely consistent with how Boards already approach impairment models, provisions and long-term estimates, where outcomes can shift significantly over time.

Confidence, in this context, does not come from certainty. It comes from discipline.

It comes from being able to see the assumptions that have been made, to understand how the process operates end-to-end, and to recognise that the narrative aligns with how the business is actually being run. Most importantly, it comes from evidence that the Board has applied challenge in a meaningful way.

If ASIC were to ask how the Board challenges climate assumptions, the organisation should be able to provide a clear and documented answer.

Assurance supports — but does not replace judgement

There is often an assumption that assurance provides a layer of protection that reduces the burden on Directors. In reality, assurance supports the declaration, but it does not replace director judgement.

Directors are still required to understand enough to question, to challenge and to form their own view on whether the disclosures are reasonable and supportable.

The directors’ declaration is where climate reporting moves from disclosure into governance.

The question is no longer whether the organisation has produced a climate report. It is whether the Board can stand behind it with confidence, supported by evidence. Because ultimately, the test is not what is written in the report. It is whether the system behind it can withstand scrutiny.