Climate-Related Financial Disclosures

Climate-Related Regulatory Reporting

Climate-related disclosures and physical risk reporting are now required by most large organisations. Despite subtle differences across different jurisdictions and markets, there is increasing focus on businesses and financial institutions to provide transparent climate reporting that shows;

  • Identifies material physical climate risks across all relevant hazards

  • Incorporate assessment of double materiality (i.e. identifying both the inward and outward business impacts of climate change risks)

  • Assesses how climate risks evolve under different warming pathways

  • Quantify impacts at asset and portfolio level

  • Demonstrate regulatory compliance, not just awareness

  • Demonstrate efforts to improve resilience through climate adaptation and mitigation modelling

  • Defend disclosures under audit, supervision, and investor scrutiny

Described below are summaries of individual regulatory drivers, key reporting requirements and how TransZero’s products and services support clients.

Failure to accurately disclose climate risks poses both a strategic risk to future profitability as well as a legal risk for company directors.

TCFD

EU Taxonomy

IFRS

ORSA

SEC

Industries

Asset Management

Retail

Banking

Insurance

Real Estate

TCFD - Task Force on Climate-related Financial Disclosures

  • Purpose:  Global, principles-based framework to disclose how climate risks affect strategy, governance, risk management, and metrics. TCFD principles have integrated into global ISSB standards.

  • Physical climate risk focus:

    • Requires identification of acute risks (e.g. floods, storms, heatwaves) and chronic risks (e.g. sea-level rise, temperature change).

    • Requires companies to consider short, medium and long term time horizons.

    • Encourages scenario analysis (including higher-warming) to test asset, supply chain, and operational resilience under different climate futures.

  • Key messaging: Companies must show where physical risks are located, how material they are, and how they are managed over short, medium, and long time horizons.

  • How can TransZero help?

    • TransZero climate scenarios for SSP2 and and SSP5 support TCFD/ISSB requirements to consider both an “orderly / intermediate climate transition” and a “high physical / limited mitigation” transition for global property assets.

EU Taxonomy - Sustainable Finance Framework

Purpose: Classification system defining which economic activities are environmentally sustainable. The EU Taxonomy is part of the European Union’s Corporate Sustainability Reporting Directive (CSRD).

  • Physical climate risk focus:

    • Requires a Climate Risk and Vulnerability Assessment (CRVA) for activities aligned with climate adaptation.

    • Physical risks must be identified, assessed, and mitigated to meet “Do No Significant Harm” (DNSH) criteria.

  • Key messaging: Companies must demonstrate that assets and activities are resilient to physical climate impacts, not just low-carbon.

  • Status: Mandatory for large EU companies and financial market participants under CSRD and SFDR.

  • How can TransZero help?

    • TransZero supports CSRD and EU Taxonomy reporting through:

      • assessment of all material physical risks to property

      • quantify hazard intensity and frequency changes

      • identify which assets are vulnerable and why

      • activities of the company contribute to change change adaptation

IFRS S2 – Climate-related Disclosures

Purpose: Trustees of the IFRS created the International Sustainability Standards Board (ISSB) on 2021. Global standard for investor-focused disclosure of climate risks and opportunities.

  • Physical climate risk focus:

    • Explicitly requires disclosure of physical risks affecting cash flows, asset values, and business continuity.

    • Links physical risk to financial planning, capital allocation, and impairment testing.

  • Key messaging: Physical climate risk must be translated into financial impacts, not just qualitative descriptions.

  • Status: Adopted or referenced by multiple jurisdictions; aligned with TCFD.

  • How can TransZero help?

    • TransZero supports IFRS S2 through reporting through:

      • quantifying asset impairment risk, insurance costs and business interruption

      • methodological transparency

SOLVENCY II > ORSA (Own Risk and Solvency Assessment) (Insurance)

Purpose: Internal risk and capital adequacy assessment required for insurers. the ORSA requirements are part of the second pillar of the European Union’s Solvency II framework.

  • Physical climate risk focus:

    • Requires insurers to assess catastrophe risk, underwriting exposure, asset vulnerability, and solvency impacts.

    • Strong emphasis on forward-looking stress testing.

  • Key messaging: Physical climate risk directly affects capital resilience and solvency, not just disclosure.

  • Status: Mandatory under Solvency II and equivalent regimes.

  • How can TransZero help?

    • TransZero translated climate change into expected loss, tail risk and volatility

    • Assess correlation of loss across perils and regions

    • Scenario-based stress testing to assess capital adequacy

    • Evaluate concentrations/accumulations of risk for (re)insurance effectiveness

U.S. Securities and Exchange Commission

Purpose: The comprehensive climate disclosure rules planned for implementation by the SEC continues to be stayed (currently pending judicial review as of March 2024). Below described the intended requirements.

  • Physical climate risk focus:

    • Publics companies (SEC registrants), both domestic and foreign, must include climate information in periodic filings as their Form 10-K annual reports or statements.

    • Requirement to consider material risks that affect the business strategy, operations, financial condition or outlook. This should include;

      • how identified climate risks have already impacted or are likely to impact strategy and business.

      • plans to mitigate or adapt to these risks, including any scenario analysis or transition planning.

      • Costs, losses, capitalised costs and charges incurred due to severe weather events or natural conditions.

  • Key messaging: Impacts Form 10-K annual reports and registration statements

  • Status: Adopted in 2024 but stayed pending judicial review.

  • How can TransZero help?

    • Identify the principle climate risks associated with the companies operations.

    • Loss quantification of all severe weather perils.

    • Climate adaptation and mitigation modelling to plan and orderly transition and improve resilience.