Australia’s First National Climate Risk Assessment Released & How It Assists Companies With Their Climate Disclosures

On 15 September 2025, the Australian Government published the final report of the first National Climate Risk Assessment, comprising a comprehensive assessment of Australia’s future climate risks and the potential vulnerabilities that could be faced across Australian communities, businesses and the natural environment.

The assessment has been prepared by the Australian Climate Service (a collaboration between the Bureau of Meteorology, the CSIRO, Geoscience Australia and the Australian Bureau of Statistics), with the input of more than 250 leading climate science and risk experts.

The report presents a comprehensive statement of the current understanding of climate science and its impacts in the Australian context and should be a key consideration for Australian businesses considering their climate risk exposures, especially those preparing their first mandatory climate disclosures under AASB S2. 

The report will serve as a critical source of information for companies preparing their climate risk assessments, as required under AASB S2. The Australian Climate Service has considered and compared three potential future global warming scenarios (scenarios with 1.5, 2.0 and 3.0 degrees of warming occurring through to 2100). The risk assessment has considered how 11 high-priority risks will evolve under each global warming scenario (including bushfires, flooding, heatwaves, sea-level rise etc.) and assessed their potential impact across 8 key ‘systems’ (including local communities, the economy, built infrastructure, nature, defence and national security etc.)

The report provides a sober assessment of Australia’s future vulnerabilities to climate change, including projections of increased exposures to extreme heat events, longer droughts, increased frequency of bushfire and rising sea-levels. The report highlights the significant risk that many parts of Australia face due to rising sea-levels, and the particular vulnerabilities faced by those located in coast areas and throughout Northern Australia. These regions are expected to most directly experience the increased pressure that climate change will place on health, critical infrastructure, natural species and ecosystems, and primary industries.

The report warns that businesses across a wide range of sectors face rising climate risks, including financial markets, critical infrastructure, resources industries, and food and healthcare systems. Risks include reductions in worker productivity (particularly outdoor workers exposed to extreme heat), increased facility damage and increasing costs of insurance, and supply chain disruptions due to worsening climate hazards. The broad scope of potential risks means that many businesses will face increased vulnerability to climate ‘shocks’ that can abruptly reduce cash-flows, increasing the risk of default or insolvency.  

“Physical risks to infrastructure and critical assets, especially in coastal regions, are expected to increase. Extreme heat is likely to reduce productivity of outdoor workers. Extreme weather events can damage facilities, disrupt operations, and lead to financial losses,” the National Climate Risk Assessment warns.

“Supply chains, particularly those dependent on agriculture, fisheries and mining, are vulnerable to climate impacts both domestically and globally. Disruptions in global supply chains caused by extreme weather in key trading regions compound these risks, affecting the availability and cost of raw materials and products. This can reduce food security and productivity and challenge the viability of some businesses, especially those in primary industries and construction.”

The risk assessment warns that climate change could have ‘cascading’ impacts across the Australian economy – with the impacts on one part of Australia’s economy having flow-on impacts for others – amplifying the challenges of building resilience and implementing effective transition measures. The report suggests that the Australian Government will face an accelerating cost burden, as demand for disaster relief funding grows, limiting its ability to cushion future climate shocks.

Australian Climate Service 2025. Australia’s National Climate Risk Assessment Report. 280pp

The report finds that financial markets are likely to be impacted by increases in the cost of insurance and potential asset impairments, while cautioning the long-term financial impacts are also uncertain and difficult to calculate.

“The affordability and availability of insurance for at-risk communities are likely to worsen, with flow-on impacts on related sectors. Loans and private and public equity markets are climate-exposed through asset investments. Climate change poses long-term risks to the Australian economy that are difficult to quantify and often sit beyond the planning horizons of financial institutions,” the report says.

The publication of the National Climate Risk Assessment report has been accompanied by the release of a ‘data explorer’ that provides access to detailed, location-based, climate hazard and vulnerability data.

The outputs of the first National Climate Risk Assessment will be an important source of information for companies seeking to understand their own climate risk disclosures and can inform the climate risk and opportunity assessments required to be included in mandatory climate disclosures under AASB S2.

Owl Advisory has the expertise and experience to help you understand the outcomes of the First National Climate Risk Assessment and work with you to integrate its findings into your own climate risk assessments and strategies.

Owl Advisory is already supporting clients with their preparations for their first mandatory climate disclosures and can support you in your climate reporting journey including understanding legislative obligations, undertaking climate change risk assessments and risk management, upskilling board and management teams and reviewing or preparing a gap analysis of existing climate and sustainability-related reports against the mandatory requirements.

This publication is a joint publication from King & Wood Mallesons, and KWM Compliance Pty Ltd (ACN 672 547 027) trading as Owl Advisory by KWM.   KWM Compliance Pty Ltd is a company wholly owned by the King & Wood Mallesons Australian partnership.  KWM Compliance Pty Ltd provides non-legal compliance and governance risk advisory services for businesses.  KWM Compliance Pty Ltd is not an incorporated legal practice and does not provide legal services. Laws concerning the provision of legal services do not apply to KWM Compliance Pty Ltd.