Climate scenario analysis under UK SRS S2: the requirement, not the recipe

What this page covers — and where to go for the method

There are two distinct questions about climate scenario analysis, and they are easy to conflate.

The first is “how do I run a scenario analysis?” — the methodology, the modelling choices, the order of work.

The second is “what does the standard oblige me to do and disclose?” — the regulatory requirement.

This page answers the second question.

For the practical, step-by-step method — scoping to exposure, selecting scenarios, setting horizons, mapping impacts and drawing the conclusion — see our companion climate scenario analysis guide.

What paragraph 22 requires

Paragraph 22 of UK SRS S2 requires an entity to use climate-related scenario analysis to assess its climate resilience, using an approach that is commensurate with its circumstances^[1].

Where climate-related risk is material, this is not optional. The entity must reach a conclusion about the resilience of its strategy and business model — and disclose how it got there^[1].

The requirement splits in two. Paragraph 22(a) is the conclusion: a disclosure of the entity’s assessment of the resilience of its strategy and business model to climate-related changes, developments and uncertainties^[1].

Paragraph 22(b) is the working: how and when the analysis was carried out, including the inputs the entity used^[1].

In other words, you cannot simply assert that your strategy is resilient.

You must show the analysis that supports the claim, in enough detail that a reader can test it.

That is what makes paragraph 22 a disclosure requirement rather than a modelling suggestion.

“Commensurate” scales the work — it does not remove it

The most contested word in paragraph 22 is “commensurate”.

It is sometimes read as an escape hatch.

It is not.

Appendix B explains that the approach must enable the entity to consider all reasonable and supportable information available at the reporting date without undue cost or effort, taking account of the entity’s exposure to climate-related risks and opportunities and its available skills, capabilities and resources^[1].

So the rigour required is a function of two things: how exposed you are, and how able you are to analyse that exposure.

The Paris-aligned scenario, and the diversity test

Among the inputs it discloses, an entity must state whether it used a climate-related scenario aligned with the latest international agreement on climate change^[1].

The standard points to the “latest international agreement” rather than naming a treaty, so the test moves as the international position moves. Today that agreement is the Paris Agreement, whose Article 2 sets the goal of holding warming to well below 2°C above pre-industrial levels and pursuing efforts to limit it to 1.5°C^[4].

In practice this means at least one ambitious decarbonisation pathway — a 1.5°C or net zero scenario — has to sit in the analysis.

But a single ambitious scenario is rarely enough.

Paragraph 22(b) also asks whether the analysis used a diverse range of scenarios, and whether the scenarios relate to transition risk or physical risk^[1]. A credible disclosure therefore pairs the Paris-aligned pathway with at least one higher-warming pathway, so both kinds of risk are surfaced.

The four pillars these disclosures sit within are set out in our UK SRS S2 climate disclosures guide.

The full disclosure checklist

This is the heart of the requirement. Paragraph 22(b) sets out, item by item, what the entity must disclose about the analysis itself^[1].

Treat it as a checklist: each row is a statement a compliant disclosure has to make.

The unifying aim is auditability. A reader — an investor, an auditor, the FCA — should be able to judge how robust the resilience conclusion in paragraph 22(a) really is, from the inputs disclosed under 22(b)^[1].

Where the entity has published a climate-related transition plan, the resilience disclosure interconnects with it, and the FCA’s CP26/5 proposal would separately require disclosure of whether such a plan has been published^[3].

Physical risk and transition risk pull in opposite directions

Paragraph 22(b) asks you to state whether your scenarios relate to transition or physical risk because the two rarely sit in a single scenario^[1].

Physical risk comes from the changing climate itself — acute events and chronic shifts. Transition risk comes from the move to a lower-carbon economy — policy, technology and market change.

They are in tension: the faster the world decarbonises, the lower the physical risk but the higher the transition risk, and vice versa.

That is precisely why the standard pushes towards a diverse range of scenarios rather than one.

The reference scenarios you are likely to cite

Because paragraph 22(b) requires you to disclose the sources of your scenarios, it helps to know which public sets dominate UK practice — though the standard mandates none of them^[1].

The NGFS scenarios, produced by the Network for Greening the Financial System for central banks and supervisors, are grouped into four categories: orderly, disorderly, hot house world, and too little too late, spanning low to high transition and physical risk^[5].

The IEA scenarios, from the World Energy Outlook and the Global Energy and Climate Model, are widely used for the energy transition: Net Zero Emissions by 2050 (NZE), Announced Pledges (APS) and Stated Policies (STEPS)^[6].

Naming a source is not the end of the obligation. Public scenarios are global and macro; the entity still has to translate a pathway into impacts on its own operations and finances, and disclose the assumptions behind that translation^[1]. That translation is the work covered in our practical scenario analysis guide.

When the requirement bites

UK SRS S1 and S2 were published on 25 February 2026 and are currently available for voluntary use^[2].

The FCA consulted in CP26/5, published on 30 January 2026, on requiring in-scope listed companies to report against UK SRS S2 for accounting periods beginning on or after 1 January 2027^[3].

CP26/5 closed on 20 March 2026, and the FCA aims to publish a Policy Statement in autumn 2026^[3].

For in-scope companies, the paragraph 22 scenario-analysis requirement applies in full from first application^[1]. Who falls in scope, and from when, is set out in our UK SRS × FCA framework, and the broader obligations in our UK SRS requirements overview.

Climate scenario analysis under UK SRS: frequently asked questions