Identifying climate-related risks and opportunities | IFRS S2

This page shows the practical steps to take to comply with paragraphs 10, 11 and 12 of IFRS S2.

Paragraph 10 of IFRS S2 - risks and opportunitiesClimate change poses a myriad of risks, from the sea level rising to less rainful, but also creates opportunities e.g. allowing for farming on previously frozen Siberian lands. IFRS S2 requires that an entity identify the climate-related risks and opportunities "that could reasonably be expected to afect the entity's prospects"; in particular they need to:

  1. Identify and describe the risks and opportunities which could affect the entity's prospects
  2. Classify each risk as either:
    1. Physical risk
    2. Transition risk
  3. Specify the time horizon (short/medium/long-term) over which the risk/opportunity could occur.
  4. Define "short term", "medium term" & "long-term"; and how these periods are linked to the planning horizons used for strategic decision-making.

The entity should use all “reasonable & supportable information that is available to the entity at the reporting date without undue cost or effort”.

In identifying risk/opportunities, the entity is required to refer to and “consider the applicability of the industry-based disclosure topics defined in the Industry-based Guidance on Implementing IFRS S2”.

Step 1 : identify what industries the entity is operating in

Here is a list of the sectors and the industries in each sector:

If you are not sure whether your company operates in a certain industry, then look at the industry description in the "IFRS S2 Industry-based guidance", which sets out what activities are conducted by businesses in that industry, and their common characteristics.

Step 2 : identify the risks & opportunities facing the industry

Now that you know what industry the entity is operating, you can find the climate-related risks and opportunities facing that sector in the "disclosure topics" section for the industry in the "IFRS S2 Industry-based guidance".

Drawing of man pointing into the sky at clouds and sunshine

IFRS S2 standard and other reference documents

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