Guidance on Scenario Analysis for Non-Financial Companies: Task Force on Climate-Related Financial Disclosures


"Climate change is spawning a host of long-term and short-term effects that affect businesses broadly and fundamentally. The World Economic Forum ranks climate risks among the top five business risks, saying “climate change is striking harder and more rapidly than many expected. Companies will be affected by climate change across multiple dimensions (strategic, operational, reputational, and financial), along the entire value chain, across regions, and over long periods of time."

"But assessing and planning for these risks — and opportunities — is challenging given the associated uncertainties. Scenario analysis helps companies in making strategic and risk management decisions under complex and uncertain conditions such as climate change. It allows a company to understand the risks and uncertainties it may face under different hypothetical futures and how those conditions may affect its performance, thus contributing to the development of greater strategy resilience and flexibility."

"Disclosure regarding strategy and scenarios is important. The Task Force on Climate-related Financial Disclosures (TCFD) recommends disclosure of “the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material” including “the resilience of the organization’s strategy, taking into consideration different climate-related scenarios.” - Task Force on Climate-related Financial Disclosures