Climate Risk: One Defensible View for the Board

Ask a board where its climate risk sits and you will usually get three different answers.

Physical risk is in a facilities spreadsheet. Transition assumptions are in a finance model. The scenario analysis is in a consultant's PDF that nobody has opened since it was delivered. Each piece is reasonable on its own, but nobody can show how they add up to an exposure the business can act on.

The Frameworks Now Test the Evidence

That gap is exactly what the frameworks now test. IFRS S2 requires companies to use scenario analysis to assess climate resilience, and to disclose how and when it was done, including the inputs and key assumptions. ESRS E1 asks for the same kind of resilience analysis, covering physical and transition risks over short, medium and long horizons.

For anyone selling into the EU, reporting to international lenders or listed in a market adopting ISSB standards, the question is no longer whether you have a view on climate risk. It is whether you can evidence it.

Intent is widespread. Complete evidence is rare.

Harder Than It Sounds

The record so far suggests that is harder than it sounds. The TCFD's final status report found that 58% of companies disclosed against at least five of its eleven recommendations in fiscal 2022, but only 4% met all eleven.

At ESG Disclose we see the same pattern in client work. The problem is rarely effort. It is that the data was never brought together, so the risk picture is always weeks behind the decision it should be informing.

What One Defensible View Looks Like

A board does not need more climate documents. It needs one view that holds together when someone asks how it was built:

• One risk register: physical and transition risks recorded in the same place, each with an owner and a score.
• Exposures in money: each material risk translated into a financial exposure the finance team recognises.
• Scenarios that are reused: the scenario inputs and assumptions documented once, and applied consistently across sites and business units.
• Evidence behind every figure: each number traceable to its data, method and reviewer, ready for the assurer.
• A board-level summary: drawn from the same governed data, so the board pack, the disclosure and the risk register always agree.

If you could not show your board a single, defensible view of climate risk today, where would the first gap be: data, methodology or ownership?

Sources: IFRS S2 Climate-related Disclosures; ESRS E1 Climate Change; TCFD 2023 Status Report.