Climate Scenario Analysis Under IFRS S2 & TCFD: A Practical Guide for Corporate Disclosure

Climate scenario analysis used to be the TCFD pillar everyone skipped on their first attempt. Under IFRS S2, it stopped being optional. If you're filing disclosures for an Indian listed entity, your board and investors now expect to see how your business holds up across at least two plausible climate futures. This guide covers the IFRS S2 requirement, the NGFS scenarios most filers use, India's RBI and BRSR overlay, and the steps that turn climate scenario analysis from a slide deck into a defensible disclosure.

What Climate Scenario Analysis Is and Why IFRS S2 Made It Mandatory

Climate scenario analysis is a structured way to ask one question: how resilient is our business model if the climate future does not look like our current planning assumptions? You build two or more plausible futures (a 1.5-degree world, a delayed-transition world, a hot-house world), then stress-test your strategy, your asset base, and your financial position against each.

Why did IFRS S2 make it mandatory? The ISSB inherited TCFD's framework and saw the same pattern across thousands of filings: companies disclosed governance and metrics fine, but skipped the strategy pillar where climate scenario analysis lived. Making it required closed the easiest gap in the regime.

IFRS S2 Climate Scenario Analysis Requirements: What's Mandatory

IFRS S2 requires four specific disclosures around your climate scenario analysis:

• The scenarios used: Which scenarios you ran, including at least one aligned with the latest international climate agreement (the 1.5-degree pathway under Paris).

• How you used them: Whether the analysis was qualitative or quantitative, the time horizons you tested, and how each scenario fed into your strategy and risk decisions.

• Assumptions and inputs: Key inputs, the source of those inputs (NGFS, IEA, IPCC pathways), and the assumptions you made about transition policy, technology adoption, and physical impact.

• Resilience assessment: What the analysis told you about your strategy's resilience, where uncertainty is highest, and how you'd adapt your business model in response.

Two practical notes from the March 2026 IFRS factsheet. Your climate-resilience assessment must be annual, but the scenarios themselves only refresh in line with your strategic planning cycle. And proportionality applies: a top-1,000 listed entity's depth is not what a smaller filer must produce.

How TCFD Scenario Analysis Carried Over to IFRS S2

The TCFD framework was absorbed by the ISSB in 2023; TCFD itself disbanded in October that year. IFRS S2 kept TCFD's four-pillar structure (governance, strategy, risk management, metrics and targets), but tightened it where TCFD left room to wiggle.

On scenario analysis, IFRS S2 added three things TCFD did not require: a mandatory 1.5-degree scenario, annual resilience assessment, and explicit disclosure of uncertainty. If you've been disclosing in TCFD format, you're 70% of the way to S2. The other 30% is rigour.

The NGFS Climate Scenarios Most Indian Companies Use

The Network for Greening the Financial System (NGFS) Phase V scenarios, released in November 2024, are the off-the-shelf reference Indian filers most often reach for. Phase V offers seven scenarios across four categories:

• Orderly: Net Zero 2050 and Low Demand. Both limit warming to 1.5 degrees through early, predictable policy.

• Disorderly: Delayed Transition and Below 2 Degrees. Policy action arrives late, then hits hard.

• Too-little-too-late: Fragmented World. Countries diverge on ambition; emissions overshoot.

• Hot House: Current Policies and Nationally Determined Contributions (NDCs). Existing commitments without strengthening.

Most Indian disclosures run Net Zero 2050, Delayed Transition, and Current Policies to bracket their resilience. The NGFS Phase VI vintage releases in 2026, but Phase V remains the operative reference for most of this disclosure year.

Physical vs Transition Risk in Climate Scenario Modelling

Every climate scenario you run produces two risk views: physical and transition. 

Physical risk: what the climate does to your assets (heatwaves, monsoon variability, cyclones, flooding, sea-level rise). 

Transition risk: what the response does to your business model (carbon pricing, policy shifts, technology displacement, changing demand).

In an orderly Net Zero scenario, transition risk is high, and physical risk is contained. In a Current Policies hot-house, the inverse: physical risk dominates, transition risk stays subdued. A complete climate scenario analysis covers both axes; running just one halves the value.

Indian Regulatory Context: BRSR, RBI, and Climate Scenario Analysis

India's climate scenario analysis landscape sits across three regulators. SEBI's BRSR Core, mandatory for the top 1,000 listed companies, does not require scenario analysis explicitly; IEEFA's January 2026 assessment flagged this as a gap versus IFRS S2. Indian filers are voluntarily layering IFRS S2 on top of BRSR to satisfy investor expectations.

The Reserve Bank of India's Commercial Banks Climate Finance Directions 2025 change the picture for banks. Climate scenario analysis and stress testing become voluntary disclosures from FY 2026-27, with mandatory rollout expected in FY 2027-28. The RBI guidance note covers physical hazards (floods, cyclones, heatwaves) alongside transition pathways. For Indian non-financial corporates, the direction of travel is unmistakable.

Step-by-Step: How to Conduct Your Climate Scenario Analysis

Plan for three to four months for a first-time scenario analysis exercise, with input from sustainability, finance, strategy, and operations.

1. Define scope and time horizons: Cover short term (under 5 years), medium (5-10 years), and long term (10-30 years). Map to your strategic planning cycle.

2. Select two to four scenarios: Include one 1.5-degree pathway. Typical Indian filer choice: NGFS Net Zero 2050, NGFS Delayed Transition, NGFS Current Policies.

3. Identify material climate risks: Physical risks first (heat, monsoon shifts, cyclones, water stress); then transition risks (carbon pricing, demand shifts, regulation, technology substitution).

4. Quantify where possible, narrate where not: Quantitative scenario modelling for material risks where you have data; qualitative narrative for emerging or hard-to-model exposures. IFRS S2 accepts both.

5. Assess resilience and identify responses: For each scenario, document what would happen to revenue, costs, asset values, and strategy. Then document the adjustments you'd make.

6. Disclose and update: Publish results in your IFRS S2 climate disclosure. Update the resilience assessment annually; refresh the scenarios themselves in line with strategic planning.

Common Mistakes in Climate Scenario Analysis Disclosure

A few patterns surface again and again in Indian first-time submissions:

• Running only one scenario: Single-scenario analysis isn't scenario analysis; it's a forecast. IFRS S2 needs at least two, with one at 1.5 degrees.

• Treating it as a sustainability-team task: Without finance, strategy, and operations in the room, the numbers are theoretical. Resilience implications need budget-holder input.

• Skipping physical risk: Indian filers often default to transition risk because the data is cleaner. Physical risk matters more for Indian operations than most disclosures admit.

• Hiding the uncertainty: S2 explicitly asks for significant areas of uncertainty. Omitting them looks like overconfidence, which auditors flag.

How Oren Supports Indian Climate Scenario Analysis Programmes

Oren's Sustainability Hub connects the scenario analysis exercise to your underlying emissions and risk data. Customisable templates pull in Scope 1, 2, and 3 inputs alongside physical-risk site data and transition-risk policy assumptions. Oren AI parses uploaded scenario outputs, structures them for disclosure, and feeds the same dataset into your BRSR, BRSR Core, CDP, and IFRS S2 filings. For Indian listed entities running scenario analysis for the first time, that's the difference between three parallel disclosure builds and one consolidated workflow.

Conclusion

Climate scenario analysis under IFRS S2 is the disclosure where Indian companies separate from the pack. Pick two or three NGFS Phase V scenarios. Cover both physical and transition risk. Engage finance and strategy, not just sustainability. Update annually. Done properly, the exercise produces something boards can act on, not just a paragraph the auditor signs off on.