Climate Risk and TCFD and ISSB S2 Aligned Disclosure

Climate risk disclosure has moved from the voluntary TCFD that ran from 2017 to 2023 to the mandatory ISSB IFRS S2, effective from January 2024, and EU ESRS E1, effective from financial year 2024. The methodology architecture still rests on the four TCFD pillars of governance, strategy, risk management and metrics and targets, yet ISSB and ESRS now ask for quantitative scenario analysis. That typically means a 1.5 degree Celsius orderly transition scenario such as NGFS Net Zero 2050 set alongside a 4 degree Celsius high warming physical scenario such as NGFS Current Policies or IEA STEPS. Physical risk assessment now calls for asset level geographic mapping against IPCC AR6 hazard projections covering heat stress measured by the cooling degree day increase, water stress drawn from WRI Aqueduct, ICE Climate and Munich Re NATCAT, sea level rise under RCP 8.5 and SSP 5 8.5 projections, tropical cyclone intensity and wildfire frequency. Transition risk quantification translates carbon price trajectories, typically 50 to 200 US dollars per tonne of carbon dioxide by 2030 in NGFS Net Zero, together with demand destruction in carbon intensive sectors, technology displacement timelines such as electric against internal combustion vehicles, green against grey hydrogen and electric arc against blast furnace, and stranded asset writedown logic, into financial impact on EBITDA, asset values and cost of capital. The hardest decisions our team helps you take are the choice of scenario boundary, the weighting of the short, medium and long time horizons and the setting of the financial impact materiality threshold.