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Critical Analysis of Climate related disclosures made by BHP Group
Contents
Introduction    3
Disclosure requirements under Practice Statement 2    4
Risks faced by BHP Group Limited    4
Nature of risks faced by BHP Limited    4
Physical risks to mining sites    4
Transition risks    6
Critical Analysis of reporting by BHP    6
Conclusion    7
References    8
Introduction
In today’s dynamic business environment, the business organizations face a number of risks which are related to change in climate and other factors. Climate related risks include those risks which arise owing to extreme weather conditions/ natural disasters which may cause destruction of physical assets, adverse impact on human lives, cause change in technology, market changes and changes in policies of government (Monasterolo, Battiston, Janetos, and Zheng 2017). The change in climate is one of the most debated issue of the present times which is being discussed by scientists, media, politicians etc. The revised framework for financial reporting lad clearly laid down that all information which has an effect on the decisions made by users of financial statements would be regarded as material and should be disclosed in the financial statements. All the risks related to climate change are considered significant by the investors as well as these risk factors make an impact on their investment decisions (Bernardi, Venuti and Bertello 2019). Hence, considering the level of importance place by investors to climate related risks, these should no longer be considered as merely a part of corporate social responsibility but instead the possible impact of these risks on the items presented in financial statements should be disclosed properly and adequately.
The Task force on Climate related Financial Disclosures had suggested the kind of information that has to be disclosed by the corporate in order to enable their shareholders and prospective investors gain a clearer view about the climate related risks faced by the company (PWC 2019). It was highlighted by the task force that business entities must now include these disclosures in their financial statements (Eccles and Krzus 2019). A further progress in this direction was achieved in the month of April, 2019 when the AASB and AU–ASB introduced a document which was intended to guide the preparers of financial statements as well as the auditors as to how they should include climate related risks in relation to the financial statements and how to report the effect of those risks on the items presented in the financial statements (PWC 2019).
Disclosure requirements under Practice Statement 2
The practice statement 2 which is based on “Making Materiality Judgements” has laid down that entities must disclose various external factors affecting the industry in which they work (including qualititative factors) and those risks which could be regarded as material by the investors (AASB, 2019). The entities must disclose the qualitative information as well apart from the financial information. The APS/PS 2 requires management of companies and their auditors to comply with the requirements of PS when preparing the half yearly and full year financial statement for the next year. The APS/PS 2 provides that expected risks that arise from climate related risks and other risks could have an effect on impairment of assets, could lead to changes in the estimated useful life of those assets (AASB, 2019). Also, these risks could possibly have a major impact on fair values of assets and may cause changes in the production costs, demand of goods and services. The Accounting Standards which may require additional disclosures in relation to climate related risks are
Risks faced by BHP Group Limited
BHP Group Limited is a public company registered in Australia. It also carries out its operations in the...