Climate scenario analysis is a structured process by which organisations assess how different possible future climate outcomes would affect their business model, financial position, and strategy. It asks: if the world limits warming to 1.5°C (requiring rapid decarbonisation and significant policy intervention), how does that affect our operations and assets? If warming reaches 3–4°C (with limited policy action but severe physical climate impacts), what risks does that create for our facilities and supply chains?
Yes – climate scenario analysis is required under AASB S2. It is one of the most technically demanding elements of the standard. Entities must disclose how they have used scenario analysis to assess the resilience of their strategy under different climate pathways, including at least one scenario consistent with limiting warming to 1.5°C and one higher-warming scenario.
Transition relief in early reporting years allows less quantitative approaches initially, with expectations for increasing sophistication over subsequent years.
We conduct AASB S2-aligned climate scenario analysis for clients in mining, resources, and industry – identifying physical and transition risks and opportunities material to each business and quantifying their potential financial impacts in a form suitable for board reporting and external disclosure.
