Requirement
To achieve this objective, an entity shall disclose information about the processes and related policies the entity uses to identify, assess, prioritise and monitor climate-related risks, including information about the inputs and parameters the entity uses (for example, information about data sources and the scope of operations covered in the processes).
Verbatim · IFRS S2
What it means
The entity describes the raw materials of its risk process: which data sources feed identification and assessment, which operational perimeter they cover, and which parameters (loss thresholds, probability bands, impact categories) calibrate the process. Readers should be able to tell whether the process is designed to catch the risks that matter to the business.
Plain English · Greentryst
Illustrative Disclosure
"Risk identification draws on three primary inputs: ten years of internal loss data covering all operated sites; two external physical-risk datasets providing catchment-level hazard projections to 2100; and a quarterly policy horizon scan covering the fourteen jurisdictions where we operate. Process coverage spans all wholly owned operations and Tier 1 suppliers representing above 60 per cent of directly contracted procurement spend."
What a good disclosure looks like
Requirement
Whether and how the entity uses climate-related scenario analysis to inform its identification of climate-related risks.
Verbatim · IFRS S2
What it means
Scenario analysis can sit in Strategy (resilience, paragraph 22) and also in Risk Management (identification). The entity describes which scenarios inform risk identification, which outputs are used, and how scenario results feed the corporate risk register.
Plain English · Greentryst
Illustrative Disclosure
"Scenario outputs from the three scenarios described under paragraph 22 directly inform risk identification. Sites whose modelled 2030 physical-loss exceeds £10m in the high-warming case are automatically flagged as principal-risk candidates. Transition-scenario outputs on carbon pricing and product demand feed the horizon-scan process that generates new transition risk candidates."
What a good disclosure looks like
Requirement
How the entity assesses the nature, likelihood and magnitude of the effects of those risks (for example, whether the entity considers qualitative factors, quantitative thresholds or other criteria).
Verbatim · IFRS S2
What it means
The assessment method. The entity describes the taxonomy used (likelihood bands, impact categories), whether measurement is qualitative, quantitative, or mixed, and what counts as a material risk under that measurement scheme.
Plain English · Greentryst
Illustrative Disclosure
"We apply the Group risk taxonomy, which assesses each risk on a five-point likelihood scale and a five-point impact scale, where the impact scale is anchored to financial-loss equivalents. A risk rated at or above 'High' on either dimension, or rated 'Medium-High' on both, is a principal risk. Climate-specific risks are assessed on the same scale to preserve comparability."
What a good disclosure looks like
Requirement
Whether and how the entity prioritises climate-related risks relative to other types of risk.
Verbatim · IFRS S2
What it means
Prioritisation relative to non-climate risks. Some firms have a single enterprise risk register; others run parallel registers. The standard asks whether climate risks are ranked alongside market, operational, and cyber risks and how the ranking is agreed.
Plain English · Greentryst
Illustrative Disclosure
"Climate-related risks are recorded in the same enterprise risk register as all other principal risks, ranked on the same likelihood-impact scale, and reviewed by the Group Risk Committee against the same prioritisation criteria. Two climate-related risks (regulatory cost of carbon and acute physical risk at named sites) sit in the Group's top ten principal risks in 2024."
What a good disclosure looks like
Requirement
How the entity monitors climate-related risks.
Verbatim · IFRS S2
What it means
Ongoing monitoring means indicators, thresholds, and triggers. The entity describes the key risk indicators tracked, the review cadence, and the escalation path when a threshold is breached.
Plain English · Greentryst
Illustrative Disclosure
"Each principal climate risk has a defined set of key risk indicators. For regulatory cost of carbon we track EU and UK carbon-price spot and forward curves, legislative horizon-scan scores, and CBAM-related landed-cost data. Indicators are reviewed quarterly at the Climate Risk Working Group and escalated to the Group Risk Committee when a threshold breach persists for two consecutive reviews."
What a good disclosure looks like
Requirement
Whether and how the entity has changed the processes it uses compared with the previous reporting period.
Verbatim · IFRS S2
What it means
A change log for the risk process itself. The entity discloses what moved in the methodology or coverage since last year: new data sources, revised thresholds, expanded perimeter.
Plain English · Greentryst
Illustrative Disclosure
"Three changes were made to the process in 2024: (i) physical-risk coverage was expanded from operated sites only to include Tier 1 suppliers representing above 60 per cent of procurement spend; (ii) scenario analysis inputs were refreshed from NGFS Phase IV to Phase V; (iii) the principal-risk materiality threshold was lowered from £15m to £10m following a review of Group financial sensitivity."
What a good disclosure looks like
Requirement
The processes the entity uses to identify, assess, prioritise and monitor climate-related opportunities, including information about whether and how the entity uses climate-related scenario analysis to inform its identification of climate-related opportunities.
Verbatim · IFRS S2
What it means
Opportunities deserve their own process, not a parenthetical line in the risk process. The entity describes how new climate-related markets, products, and capabilities are screened, tested, and monitored.
Plain English · Greentryst
Illustrative Disclosure
"Climate opportunities are identified through an annual market-scan run by Strategy, validated through the same scenario analysis used for risk identification, and scored on adjacency, addressable-market, and expected-margin criteria. Four opportunities are currently on the active portfolio: low-carbon product lines, embodied-carbon advisory services, hydrogen-readiness engineering, and carbon-credit portfolio management."
What a good disclosure looks like
Requirement
The extent to which, and how, the processes for identifying, assessing, prioritising and monitoring climate-related risks and opportunities are integrated into and inform the entity's overall risk management process.
Verbatim · IFRS S2
What it means
The integration question, answered plainly. The test is whether climate risk lives inside the enterprise risk framework or alongside it.
Plain English · Greentryst
Illustrative Disclosure
"Climate risk identification, assessment, prioritisation, and monitoring are fully integrated into the Group risk management process. Climate risks use the same register, the same taxonomy, the same escalation thresholds, and are reviewed at the same Group Risk Committee meetings as other principal risks. The Group Chief Risk Officer is accountable for the framework, with the Chief Sustainability Officer supporting for climate-specific content."
What a good disclosure looks like
Requirement
In preparing disclosures to fulfil the requirements in paragraph 25, an entity shall avoid unnecessary duplication in accordance with IFRS S1 (see paragraph B42(b) of IFRS S1). For example, although an entity shall provide the information required by paragraph 25, if oversight of sustainability-related risks and opportunities is managed on an integrated basis, the entity would avoid duplication by providing integrated risk management disclosures instead of separate disclosures for each sustainability-related risk and opportunity.
Verbatim · IFRS S2
What it means
Mirror of paragraph 7 for Risk Management. If the enterprise risk process covers climate alongside other sustainability matters on the same architecture, the entity writes the risk process disclosure once and maps across.
Plain English · Greentryst
Illustrative Disclosure
"The Group risk management process described above applies in common to climate-related, nature-related, and other sustainability-related risks and opportunities. The disclosure in this section therefore serves all sustainability-related disclosures, with climate-specific details noted where the process diverges."
What a good disclosure looks like