Quantifying the Financial Implications of Climate Change

One of the most challenging aspects of IFRS S2 implementation is moving beyond qualitative discussion and understanding how climate-related risks and opportunities may affect an organisation’s future financial performance.

Many organisations have identified their climate-related risks, yet struggle to answer practical questions such as:

  • How could extreme weather affect our operations?
  • How might changing regulations increase operating costs?
  • What financial impact could carbon pricing have on our business?
  • How resilient is our current business strategy under different climate futures?
  • Which climate risks are likely to have the greatest financial significance?

GreenCo helps organisations answer these questions through structured climate scenario analysis and financial impact assessment, enabling management to make informed decisions supported by transparent methodologies and internationally recognised climate science.

What Is Climate Scenario Analysis?

Climate scenario analysis is a structured process used to evaluate how an organisation may perform under different future climate conditions.

Rather than attempting to predict the future, scenario analysis explores a range of plausible climate pathways and examines how these could influence an organisation’s operations, supply chain, assets, markets and financial performance.

The objective is to improve organisational resilience by helping management understand potential risks, opportunities and strategic responses under different climate futures.

Our Step By Step Methodology

GreenCo adopts a practical, evidence-based methodology aligned with the principles of IFRS S2 and recognised international guidance.

Our typical engagement includes the following steps.

Step 1 – Identify Material Climate Risks and Opportunities

Working together with management, we identify the climate-related risks and opportunities that are most relevant to the organisation, considering its industry, business model and operating environment.

Coverage include:

  • Physical risks: Acute extreme weather events, flooding, Chronic rising in mean temperature
  • Transition risks: policy and legal risks, technology and market risks
  • Climate-related opportunities: enhance in energy efficiency, open up of new market opportunities

Step 2 – Collect Financial and Operational Data

We work with management to collect historical information that forms the foundation of the analysis, including:

  • Revenue by business segment
  • Operating costs
  • Energy consumption
  • Production or operational activity
  • Asset information
  • Business locations
  • Other relevant operational indicators

Where historical information is incomplete or unavailable, we can develop reasonable proxy assumptions using industry benchmarks and available business information.

Step 3 – Develop Climate Scenarios

Our consultants develop appropriate climate scenarios using internationally recognised scientific pathways, including where appropriate:

  • Intergovernmental Panel on Climate Change (IPCC)
  • Network for Greening the Financial System (NGFS)
  • Other recognised scientific and regulatory references

These scenarios consider different climate futures, transition pathways and policy environments to evaluate potential impacts on the organisation.

Step 4 – Build Financial Impact Models

This is where GreenCo’s advisory approach provides significant value.

Instead of relying solely on qualitative descriptions, we build practical financial models that estimate how identified climate risks and opportunities could affect key business metrics.

Depending on the organisation and available information, the modelling may consider impacts on:

  • Revenue
  • Operating expenditure
  • Capital expenditure
  • Asset impairment
  • Operating margins
  • Cash flows
  • Financing costs
  • Other financial indicators

Our models are designed to remain transparent and explainable, allowing management to understand the key assumptions and drivers behind the results.

Step 5 – Review Assumptions with Management

Climate modelling inevitably involves assumptions.

GreenCo works closely with management, finance teams and relevant business functions to review key assumptions, challenge uncertainties and refine the analysis where necessary.

This collaborative approach helps ensure that the final assessment reflects both scientific evidence and the organisation’s business realities.

Deliverables

Depending on the scope of the engagement, our deliverables may include:

  • Climate scenario analysis report

  • Climate resilience assessment

  • Scenario assumptions documentation

  • Financial impact assessment model

  • IFRS S2 disclosure supporting narrative

Example Financial Impact Assessment

Financial Assessment

Illustrative example of climate-related financial impacts assessed under multiple climate scenarios. Actual methodologies, assumptions and outputs are tailored to each organisation based on its business activities, available data and material climate risks.

The example above is extracted and re-design from a publicly available sustainability report. Client-specific information has been presented only where already publicly disclosed.

Why Choose GreenCo?

Many organisations find climate scenario analysis challenging because it requires expertise across climate science, finance and business strategy.

GreenCo combines these disciplines to help clients develop practical and decision-useful assessments rather than purely theoretical exercises.

Our approach emphasises:

  • Alignment with IFRS S2 disclosure expectations
  • Internationally recognised climate scenarios and methodologies
  • Transparent assumptions and modelling logic
  • Practical financial analysis tailored to the organisation
  • Collaborative engagement with management and finance teams
  • Clear documentation to support sustainability reporting and governance
  • Expert review opinion from the consulting team with financial qualifications including CPA, CFA, FRM

Rather than applying a generic template, every assessment is tailored to the organisation’s industry, operating environment and available information, enabling management to better understand the potential financial implications of climate-related risks and opportunities.

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