UK SRS S2 · paragraph 22
Climate scenario analysis under UK SRS S2: the requirement
Climate scenario analysis is required of every entity applying UK SRS S2, in so many words: an entity “shall use climate-related scenario analysis to assess its climate resilience” (UK SRS S2 ¶22).
This page sets out what that sentence obliges you to do and to disclose, and how the FCA’s comply-or-explain rules treat it from 2027.
How to run the analysis, step by step, is on the scenario analysis guide.
The requirement
One sentence, two disclosures
Paragraph 22 sits in the strategy pillar, and its objective is that users can understand the resilience of the entity’s strategy and business model to climate-related changes, developments and uncertainties.
It then asks for two separate things.
22(a) is the conclusion: the entity’s assessment of its climate resilience as at the reporting date.
That assessment must cover the implications for strategy and business model, the significant areas of uncertainty, and the capacity to adjust or adapt over the short, medium and long term.
Capacity to adapt has three named parts: available financial resources, the ability to redeploy, repurpose, upgrade or decommission assets, and the effect of current and planned investment in mitigation, adaptation and opportunities.
22(b) is the working: how and when the analysis was carried out, including its inputs and its key assumptions.
The standard defines climate resilience as the capacity to adjust to climate-related changes, developments or uncertainties, covering both strategic and operational resilience (UK SRS S2 Appendix A).
The same text sits in IFRS S2 ¶22; the UK made no amendment to the paragraph or its application guidance.
“The entity shall use climate-related scenario analysis to assess its climate resilience using an approach that is commensurate with the entity’s circumstances (see paragraphs B1–B18). In providing quantitative information, the entity may disclose a single amount or a range.”
UK SRS S2 ¶22
The disclosure
What paragraph 22(b) makes you state
Treat each row as a sentence the report must contain. The standard lists the items; it does not give them a count, and neither do we.
| Paragraph | What the disclosure states |
|---|---|
| 22(b)(i)(1) | Which climate-related scenarios were used, and their sources |
| 22(b)(i)(2) | Whether the analysis included a diverse range of scenarios |
| 22(b)(i)(3) | Whether the scenarios are associated with transition risks or physical risks |
| 22(b)(i)(4) | Whether one scenario was aligned with the latest international agreement on climate change |
| 22(b)(i)(5) | Why the chosen scenarios are relevant to assessing resilience |
| 22(b)(i)(6) | The time horizons used |
| 22(b)(i)(7) | The scope of operations used, for example operating locations and business units |
| 22(b)(ii) | Key assumptions on climate policy in the jurisdictions of operation, macroeconomic trends, national or regional variables, energy usage and mix, and technology |
| 22(b)(iii) | The reporting period in which the analysis was carried out |
The national- and regional-level variables are named in the standard: local weather patterns, demographics, land use, infrastructure and availability of natural resources.
The point of the list is that a reader can judge the resilience conclusion from the inputs, rather than take it on trust.
Scenario analysis also reaches beyond paragraph 22: ¶25(a)(ii) asks whether and how it informs the identification of climate-related risks, and ¶25(b) the same for opportunities.
Where an internal carbon price is used in scenario analysis, ¶29(f) asks for an explanation of how, and the price per tonne.
The rest of the climate standard, pillar by pillar, is on UK SRS S2 climate disclosures, and a plain-English reference to the standard is on our sister site’s UK SRS reference.
Proportionality
“Commensurate” scales the depth, not the duty
The application guidance splits the judgement into two steps: assess the entity’s circumstances (¶¶B2–B7), then determine the approach (¶¶B8–B15).
Circumstances mean two things: the entity’s exposure to climate-related risks and opportunities, and the skills, capabilities and resources available for the analysis (¶B2).
The circumstances must be reassessed each time the analysis is run (¶B3).
Skills can be internal or external, and the guidance adds a line that closes an obvious escape route: “if resources are available to the entity then it will be able to invest in obtaining or developing the necessary skills and capabilities” (¶B6).
It also expects experience to count: an entity in an industry where scenario analysis is established practice, such as extractives and mineral processing, would be expected to have built its capabilities (¶B7).
Qualitative scenario narratives can be a reasonable and supportable basis on their own (¶B15).
But ¶B17 is explicit that an entity with high exposure and access to the necessary skills, capabilities or resources “is required to apply a more advanced quantitative approach”.
So the honest summary is that quantification is scaled to circumstances, and for a highly exposed, well-resourced company it is required.
| Exposure | Skills, capabilities, resources | What the standard expects |
|---|---|---|
| High | Available | A more advanced quantitative approach is required (¶B17) |
| High | Not yet available | A simpler approach at first, such as qualitative narratives, building to quantitative over time (¶B17) |
| Few or less severe risks | Any | Users are less likely to benefit from sophisticated analysis (¶B4) |
Timing
Run it each planning cycle, assess resilience every year
Paragraph B18 separates the analysis from the assessment, and many first reports blur the two.
The scenario analysis may follow the strategic planning cycle, including a multi-year cycle, “for example, every three to five years”, and must at a minimum be updated in line with that cycle.
The resilience assessment is different: it “is required to be carried out annually”, so the 22(a) disclosure is updated at every reporting period.
In a year with no new analysis, the 22(b) disclosure of how the analysis was done can stay as it was, and 22(b)(iii) tells readers which period it came from.
The approach need not be the same from one planning cycle to the next, because practice and the entity’s circumstances both change (¶B16).
Pension trustees work to a different rhythm: DWP’s statutory guidance under SI 2021/839 asks for scenario analysis in the first year the duty applies and at least every three scheme years after that.
Which scenarios
Diversity, alignment and relevance
The standard asks whether the range was diverse and whether one scenario aligned with “the latest international agreement on climate change”; it does not require any particular scenario.
Today that agreement is the Paris Agreement, whose Article 2 sets the goal of holding warming well below 2°C and pursuing efforts to limit it to 1.5°C.
The drafting is looser than TCFD’s, whose Strategy c) asked for resilience “including a 2°C or lower scenario”.
What the standard does require is a reasonable and supportable basis for the scenarios chosen, and inputs relevant to the entity’s activities and locations (¶¶B12–B13).
Publicly available scenarios from authoritative sources count as available without undue cost or effort (¶B11).
Two sets dominate: the NGFS scenarios and the IEA’s Net Zero Emissions by 2050 scenario.
Both are reissued, and the IEA’s current vintage is no longer a limited-overshoot pathway, so a disclosure should name the edition it used.
How to choose between them, and what each is good for, is in the scenario analysis guide.
Two examples the standard gives (¶B12)
- Regulated emissionsAn orderly transition scenario
For operations concentrated where emissions are, or are likely to be, regulated — or one consistent with jurisdictional commitments to the latest international agreement.
- Physical exposureA localised, current-policies scenario
For an entity with heightened exposure to physical climate-related risks.
Physical and transition
The two kinds of risk the scenarios must reach
Paragraph 10(b) makes the entity label every identified risk as one or the other, and 22(b)(i)(3) asks which kind each scenario is associated with. The definitions are the standard’s own.
| Climate-related physical risk | Climate-related transition risk | |
|---|---|---|
| Definition | Risks resulting from climate change, event-driven (acute) or from longer-term shifts in climatic patterns (chronic) | Risks that arise from efforts to transition to a lower-carbon economy |
| Examples the standard names | Storms, floods, drought or heatwaves; changes in precipitation and temperature, sea level rise, reduced water availability, biodiversity loss, soil productivity | Policy, legal, technological, market and reputational risks |
| Financial channels it names | Direct damage to assets; supply-chain disruption; water availability; extreme temperatures affecting premises, operations, transport and employee health and safety | Increased operating costs or asset impairment from new regulation; shifting consumer demand; new technology |
| Scenarios that bring it out | Higher-warming pathways, such as the NGFS hot house world category | Faster or later-and-sharper policy pathways, such as the NGFS orderly and disorderly categories |
The two pull against each other: a fast transition lowers the physical end of the range and raises transition costs, and a slow one does the reverse.
That is why a single scenario rarely answers the question the standard asks, and why 22(b)(i)(2) asks whether the range was diverse.
The cross-industry metrics then ask for the amount and percentage of assets or business activities vulnerable to each kind of risk (¶29(b) and (c)).
Who has to
The requirement’s legal footing in the UK
UK SRS S2 is a standard, not a law. Whether paragraph 22 binds you depends on which instrument points at it.
| Who | Instrument | Status of scenario analysis |
|---|---|---|
| Any entity choosing UK SRS | The standard alone | Required by ¶22 for an entity asserting compliance with UK SRS S2 |
| Listed companies, UKLR 6, 14, 15, 16, 22 | UKLR 6.6.6R(7A), periods beginning on or after 1 Jan 2027 | Comply or explain: meet ¶22 or state what is not met, why, and the steps planned |
| Listed companies, earlier periods | UKLR 6.6.6R(8), TCFD-aligned | TCFD Strategy c), comply or explain |
| Companies Act in-scope companies and LLPs | CA 2006 s.414CB(2A)(f) | Resilience analysis under different scenarios, or a clear and reasoned explanation for omitting it |
| Large occupational pension schemes | SI 2021/839 | Scenario analysis by trustees |
The government published UK SRS S2 for voluntary use; its guidance says the standards are available “by any entity that chooses to do so”.
The FCA’s consultation, CP26/5, proposed making UK SRS S2 mandatory for listed companies, and PS26/19 decided otherwise: comply or explain across UK SRS.
The transitional reliefs in the FCA rules cover Scope 3 for one year and non-climate matters under UK SRS S1 for two; nothing relieves paragraph 22.
A company that cannot yet meet paragraph 22 in full explains under UKLR 6.6.6R(7A)(b), and an explanation of that kind stops it making an unreserved statement of compliance with UK SRS S2.
How an explanation is built is on UK SRS comply or explain, the rules themselves on UK SRS and the FCA, and the TCFD predecessor on TCFD vs UK SRS.
Connections
Where the resilience disclosure meets the rest of the report
Scenario analysis tests the strategy, so it should agree with what the report says about the strategy.
If the entity has a climate-related transition plan, ¶14(a)(iv) asks for its key assumptions and dependencies, and those assumptions should be the ones the scenarios stress; see transition plans in the UK.
The time horizons in 22(b)(i)(6) should match how the entity defines short, medium and long term under ¶10(d), which in turn must link to its planning horizons.
Anticipated financial effects under ¶¶15–16 draw on the same analysis, and connected information between the sustainability disclosures and the financial statements is a UK SRS S1 requirement.
Materiality decides how much of this detail belongs in the report at all; see UK SRS materiality.
You can book a free 15-minute call to talk through what proportionate analysis looks like for your exposure.
Frequently asked
Climate scenario analysis — frequently asked
Does UK SRS S2 require climate scenario analysis?
Yes, for any entity applying the standard. Paragraph 22 says the entity "shall use climate-related scenario analysis to assess its climate resilience using an approach that is commensurate with the entity's circumstances". The standard scales how sophisticated the analysis must be, not whether it is done.
Is climate scenario analysis mandatory for UK listed companies?
Not in the strict sense. Under the FCA's final rules in PS26/19, listed companies in UKLR 6, 14, 15, 16 and 22 report against UK SRS S2 on a comply-or-explain basis for accounting periods beginning on or after 1 January 2027. A company that does not meet paragraph 22 must say which requirements are not met, why, and what steps it is taking or plans to take. The FCA's transitional reliefs cover Scope 3 and non-climate matters, not scenario analysis.
Does scenario analysis have to be quantitative?
Not always. Paragraph B15 says qualitative information, including scenario narratives, alone or combined with quantitative data, can be a reasonable and supportable basis for the resilience assessment. But paragraph B17 says an entity with a high degree of exposure to climate-related risks and opportunities, and with access to the necessary skills, capabilities or resources, is required to apply a more advanced quantitative approach.
How often must climate scenario analysis be done?
At minimum in line with the entity's strategic planning cycle, which paragraph B18 says may be multi-year, for example every three to five years. The resilience assessment itself must be carried out annually, and the disclosure of its results under paragraph 22(a) updated at each reporting period. The disclosure of how the analysis was done, under paragraph 22(b), can stay unchanged in years when no new analysis is run.
Does UK SRS S2 require a 1.5°C or Paris-aligned scenario?
No. Paragraph 22(b)(i)(4) requires the entity to disclose whether it used, among its scenarios, one aligned with the latest international agreement on climate change. The standard does not name the Paris Agreement and does not require such a scenario to be used. TCFD Strategy c) was more directive, asking for resilience "including a 2°C or lower scenario".
What must be disclosed about the scenarios used?
Paragraph 22(b) asks which scenarios were used and their sources, whether the range was diverse, whether they relate to transition or physical risk, whether one was aligned with the latest international agreement, why they are relevant, the time horizons, the scope of operations, the key assumptions (climate policy, macroeconomic trends, national or regional variables, energy usage and mix, technology) and the reporting period in which the analysis was carried out.
Does UK SRS S2 require the NGFS or IEA scenarios?
No. The standard mandates no scenario set. Paragraph B11 treats publicly available scenarios from authoritative sources as available without undue cost or effort, and paragraph B12 requires a reasonable and supportable basis for the scenarios chosen. The NGFS and IEA sets are common choices; each is reissued periodically, so the vintage used should be stated.
Do companies outside the listing rules have to do scenario analysis?
Some do, under other instruments. Section 414CB(2A)(f) of the Companies Act 2006 requires in-scope companies to give "an analysis of the resilience of the company's business model and strategy, taking into consideration different climate-related scenarios", though directors may omit it with a clear and reasoned explanation. Trustees of large occupational pension schemes carry out scenario analysis under SI 2021/839.
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner. Secondary commentary is never the source for a number.
- Department for Business and TradeUK SRS S2 Climate-related Disclosures (PDF)
¶22 (the requirement and the disclosure list), ¶¶B1–B18 (proportionality, inputs, analytical choices, frequency), ¶¶10, 14, 25(a)(ii), 29(f).
- IFRS FoundationIFRS S2 (December 2025 text, HTML)
The ISSB text UK SRS S2 endorses; ¶22 and Appendix B are unchanged by the UK.
- Department for Business and TradeUK Sustainability Reporting Standards — guidance
UK SRS S1 and S2 are "available for voluntary use, by any entity that chooses to do so".
- Financial Conduct AuthorityPS26/19: Aligning listed issuers' sustainability disclosures with international standards (PDF)
¶¶1.2, 3.12, 3.14 (reliefs cover Scope 3 and S1 non-climate matters); Appendix 1, UKLR 6.6.6R(7A).
- Financial Conduct AuthorityCP26/5 consultation page
The consultation of 30 January 2026, which proposed mandatory UK SRS S2; the final rules adopted comply or explain.
- TCFDRecommendations of the TCFD — Final Report (June 2017), Figure 4
Strategy c): resilience "taking into consideration different climate-related scenarios, including a 2°C or lower scenario".
- TCFDGuidance on Scenario Analysis for Non-Financial Companies (October 2020)
One of the two TCFD documents UK SRS S2 footnote 2 says the application guidance draws on.
- UNFCCCThe Paris Agreement, Article 2
"Holding the increase in the global average temperature to well below 2°C… and pursuing efforts to limit the temperature increase to 1.5°C".
- Network for Greening the Financial SystemNGFS Scenarios Portal
A reference scenario set; the NGFS is not a standard-setter and its scenarios are vintaged.
- International Energy AgencyNet Zero Emissions by 2050 Scenario (NZE) — Global Energy and Climate Model
Updated each year; the current vintage is no longer a limited-overshoot scenario.
- legislation.gov.ukCompanies Act 2006, section 414CB(2A)(f) and (4A)–(4B)
The statutory resilience-under-scenarios disclosure and the omission route.
- legislation.gov.ukSI 2021/839 — pension scheme climate governance and reporting
Scenario analysis by trustees of in-scope occupational pension schemes.
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