Climate Resilience Between the Lines: What Companies Need to Know About the New ESRS Climate Risk Regulations

The regulatory landscape for corporate climate risk disclosure is undergoing a fundamental transformation, driven by the European Union's Corporate Sustainability Reporting Directive (CSRD) and its accompanying European Sustainability Reporting Standards (ESRS). This shift represents a paradigm change from voluntary to mandatory climate risk reporting, introducing standardised methodological requirements for risk assessment, scenario analysis, and financial impact quantification.

The evolution moves beyond traditional environmental reporting to encompass comprehensive climate risk management frameworks, requiring organisations to evaluate both physical and transition risks across their entire value chain. This regulatory advancement reflects the growing understanding within academic and policy circles of the systemic nature of climate risks and their potential impacts on financial stability and corporate resilience.

As CSRD Wave 2 companies (Companies that meet at least two requirements from: More than 250 employees, 50 million EUR in net turnover, 25 million EUR in balance sheet) prepare for compliance in 2025, many are discovering that ESRS E1's climate risk reporting requirements present significant challenges, particularly around scenario analysis and financial impact assessments. At OCORISK, we've developed a streamlined approach to help mid-sized companies tackle these complex requirements effectively.

The challenge ahead

The new ESRS climate disclosure requirements demand comprehensive reporting on:

• Physical and transition risks in your operations and across your upstream and downstream value chain.
• Climate scenario analysis incorporating both 1.5°C and high-emission scenarios.
• Anticipated financial effects from climate risks and potential to benefit from climate-related opportunities.
• Detailed and location-based assessment of assets at risk, and potential stranded assets.
• Climate mitigation actions and adaptation strategies.

What's particularly challenging for companies is the need to provide full quantitative data after the first three years of sustainability reporting under ESRS. During the initial three-year phase-in period, companies have flexibility to limit value chain disclosures to in-house and publicly available data, and they can provide qualitative reporting if quantitative disclosures are impractical. This creates an opportunity to progressively build data collection systems while still meeting compliance requirements.

How OCO Risk can help

By understanding and actively managing climate risks, companies can not only meet regulatory requirements but also build more resilient business models ready for a changing climate. Our team of climate risk experts can help you navigate the complexities of climate resilience.

Whether you're just starting your climate journey or looking to enhance your existing approach, reach out at [email protected] to learn how we can support your organization's climate resilience strategy.

Pragmatic data collection

We focus on what matters most - helping you identify and collect the essential data points needed for ESRS compliance without overwhelming your teams.

Scenario analysis made simple

We provide pre-analysed scenarios tailored to your industry, making it easier to assess both physical and transition risks.

Our approach includes:

• Physical risk analysis leveraging best-in-class third party data to fully capture assets exposure to climate change
• Stakeholder engagement workshops to validate scenario analysis outputs and outcomes
• CSRD-ready results to streamline reporting efforts and pre-established ERM integration processes

Financial impact assessment

We help you translate climate risks into financial terms, focusing on the specific metrics required by ESRS E1-9.

Including:

• Assets at physical and transition risk.
• Revenue exposure to climate risks.
• Potential liabilities from transition risks.

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