You file the same physical-risk number twice
If your company reports under both the global climate standard and the European one, you disclose the same physical-risk number twice, in two slightly different shapes. A lot of large companies now do exactly that.
A multinational listed in the EU and elsewhere often reports under IFRS S2 (the climate standard from the International Sustainability Standards Board, the ISSB) for its global filing, and under ESRS E1 (the European Sustainability Reporting Standards climate standard, which sits inside the EU’s Corporate Sustainability Reporting Directive, the CSRD) for its European one. Both are mandatory. Both ask for a figure on the assets exposed to physical climate risk. This piece answers one question: where do the two versions of that figure actually differ, and what do you have to add when you move from one to the other?
Take a single warehouse in a flood-prone river basin. In the global filing it sits inside one line: the amount and percentage of assets exposed to physical risk. In the European filing the same warehouse has to appear in several ways: its value before any flood defences are counted, whether the hazard is sudden or slow, how much of it is already protected, and where it sits. Same asset, more boxes to fill.
This piece covers physical risk only: the risk of climate acting on your assets, such as floods, heat, storms, and rising seas. Both standards also cover transition risk (the risk from the shift to a low-carbon economy) and climate opportunities. Those sit outside this comparison. Everything below stays on the physical-risk number.
Same obligation, different precision. IFRS S2 sets the principle and leaves the shape to you; ESRS E1 pins it down.
- Same core metric: both standards ask for the amount and percentage of assets exposed to physical climate risk.
- ESRS E1 adds five things on top: a before-adaptation (gross) figure, a split between sudden (acute) and slow (chronic) hazards, the share of assets already covered by adaptation, asset location, and net revenue at risk.
- The biggest real difference is scenario analysis: IFRS S2 names it as something you must run; ESRS names the disclosure of how you used one, and in practice most companies run one anyway.
- Version note: the November 2025 ESRS amended draft (E1-11) drops the explicit acute/chronic split and softens asset location to guidance.
Two aligned standards, built to interoperate
These are not rival standards you choose between. The EU and the ISSB developed them alongside each other, and a joint guidance from EFRAG (the EU’s technical adviser on the standards) and the ISSB maps them paragraph by paragraph. That guidance shows the climate disclosures are closely aligned, and that where they differ, ESRS generally asks for the same thing plus extra detail. So for a company filing under both, the task is not “pick one.” It is “file the shared number, then add the European extras.”
What ESRS adds to the IFRS S2 number
The IFRS S2 requirement (its Paragraph 29(c)) asks for the amount and percentage of assets exposed to physical climate risk. It does not say much more. The ESRS requirement (called Disclosure Requirement E1-9, paragraph 66, in the 2023 standard that is in force today) asks for the same number, then pins down several things IFRS S2 leaves to your judgement.
1. Before adaptation (the “gross” view). ESRS paragraph 66(a) asks for the assets at risk:
“…before considering climate change adaptation actions…”
In plain terms: show the raw exposure first, before any flood walls or other defences are counted in. IFRS S2 says nothing on this point. The joint guidance is explicit:
“IFRS S2 does not explicitly state this is before or after considering adaptation or mitigation actions.”
In plain terms: under IFRS S2 you can present the figure either way. The accurate three-step picture for a dual reporter: the IFRS S2 text is silent; a gross (before-adaptation) presentation is becoming the market convention so the two filings reconcile; ESRS makes gross mandatory. This part of the requirement is stable: it reads the same in the 2023 standard and in the 2025 amended draft.
Why the gross view matters: it shows the exposure you carry before you take any credit for defences. A reader sees the raw risk first, then judges the adaptation against it. After-adaptation figures bury that starting point.
2. The share already covered by adaptation. ESRS paragraph 66(b) asks for the proportion of at-risk assets already addressed by adaptation actions. IFRS S2 has no equivalent. Stable across both ESRS versions.
3. Net revenue at risk. ESRS paragraph 66(d) asks for the revenue tied to activities exposed to physical risk. The nearest IFRS S2 wording covers “business activities,” a term it does not define. Stable across both ESRS versions.
4. A split between sudden and slow hazards. ESRS paragraph 66(a) asks for the asset amounts:
“…disaggregated by acute and chronic physical risk…”
In plain terms: separate the exposure to sudden events (a flood, a storm) from the exposure to slow shifts (rising heat, long-run water stress). IFRS S2 does not require this split. One version note: this split is required by the 2023 standard in force today. The November 2025 amended draft of ESRS E1 (renumbered E1-11, not yet adopted) drops the explicit acute/chronic split. So it is a current extra, not a permanent one.
5. Location of the assets. This one is also version-sensitive. The in-force standard (paragraph 66(c)) asks for the location of significant assets at risk as a full disclosure requirement. The 2025 amended draft moves it down to an application requirement, which is guidance rather than a hard datapoint. IFRS S2 has no location requirement either way.
One precision point that matters to an auditor reading both filings: IFRS S2 lets you give the financial-effect figures as a single amount or a range; ESRS allows a range only in limited cases. That is a rule about the money figure, not about the asset-exposure metric above.
IFRS S2 vs ESRS E1: the differences in one table
| What | IFRS S2 (Paragraph 29(c)) | ESRS E1-9 (2023, in force) |
|---|---|---|
| The core metric | Amount and % of assets exposed | Same |
| Before vs after adaptation | Silent (you choose) | Before adaptation (gross), required |
| Sudden vs slow hazards | Not required | Split required (dropped in the 2025 draft) |
| Share covered by adaptation | Not required | Required |
| Location of assets | Not required | Required (becomes guidance in the 2025 draft) |
| Net revenue at risk | “Business activities” (undefined) | Net revenue at risk, required |
| Money figure: single or range | Single amount or a range | Range only in limited cases |
| Scenario analysis | Required (Paragraph 22) | Not required to run; required to disclose how used |
| Materiality lens | Financial only | Double (financial and impact) |
Where IFRS S2 is as strict as ESRS: eight industries
There is one place IFRS S2 is as prescriptive as ESRS. For certain industries, IFRS S2 routes you to its Industry-based Guidance through a rule called Paragraph 32, which sets a fixed threshold and unit for the physical-risk metric. The joint guidance puts it plainly:
“IFRS S2 specifically requires that an entity shall refer to and consider the Industry-based Guidance on Implementing IFRS S2 for: … determining industry-based metrics to disclose (see paragraph 32 of IFRS S2)…”
In plain terms: in those sectors, IFRS S2 hands you the recipe instead of the principle. Across eight of them, including real estate, insurance, and water utilities, this is where IFRS S2 pins the metric down to a set threshold. For a company filing under both, that is the useful takeaway: your two filings sit closest precisely where IFRS S2 is most specific. The sector detail is walked in our IFRS S2 industry metrics analysis.
Scenario analysis: IFRS S2 makes you run it, ESRS makes you disclose how
This is the difference most people get wrong. IFRS S2 (its Paragraph 22) requires you to run climate scenario analysis to test resilience. ESRS does not. The joint guidance:
“ESRS E1 does not mandate the use of scenario analysis but requires disclosing how an entity has used climate-related scenario analysis…”
In plain terms: IFRS S2 tells you to run the analysis; ESRS tells you to disclose how you used one, if you used one. In practice many companies run one anyway, because the forward-looking financial-effect figures in ESRS need a forward-looking basis. And where exposure is high, IFRS S2 pushes that analysis toward a quantitative approach. The IFRS S2 side is walked in our IFRS S2 scenario analysis piece.
Why double materiality rarely changes the number
ESRS uses double materiality: a matter counts if it affects the company financially, or if the company affects people and the environment, or both. IFRS S2 uses one lens: financial. That sounds like a wide gap. For the physical-risk number, it usually is not.
Physical risk runs inbound: climate acting on the company’s assets and revenue. That is financial-materiality territory by its nature. The joint guidance confirms the financial lens is aligned across the two standards. The second, impact lens mostly bites on outbound effects such as emissions, which sit outside this comparison. So double materiality is the structural difference between the regimes, but a physical risk large enough to hit the balance sheet clears the financial test either way.
What to add when you cross from IFRS S2 to ESRS
If you already produce the IFRS S2 figure, here is what ESRS adds on top, in plain order:
- Present the asset figure before adaptation (the gross view), not after.
- Split the exposure between sudden and slow hazards. (Required by the standard in force; the 2025 draft drops this.)
- Add the share of at-risk assets already covered by adaptation.
- Add the location of significant exposed assets. (A hard requirement now; guidance in the 2025 draft.)
- Give the net revenue tied to exposed activities, not just an asset figure.
- Give the financial-effect figures as single amounts, keeping ranges to the limited cases ESRS allows.
- Disclose how you used scenario analysis, even though ESRS does not require you to run one.
None of these are fresh analysis if your IFRS S2 work was thorough. They are mostly a matter of presenting the same underlying exposure in the shape ESRS asks for, and tying it back to the audited accounts.
The groundwork both numbers rest on
Both versions of the metric rest on the same groundwork: a forward-looking, location-level view of which assets are exposed to which hazards, under a high-emissions scenario, across time. ESRS paragraph 66 ties the amounts back to the audited financial statements, and IFRS S2 carries the same consistency idea.
This is where Continuuiti fits. Our Climate Risk assessment scores twelve physical hazards at any location, under two scenarios (a middle path and a high-emissions path) across a historical baseline and 2030, 2040, and 2050. The assessment measures the hazard acting on the location. It does not assume exposure away with site-level defences. That makes it a before-adaptation view by construction, which is exactly the “gross” basis ESRS requires.
Our boundary, stated plainly: we produce the asset-level exposure assessment. Your finance team maps its own carrying amounts onto it and reconciles to the financial statements. We supply the exposure; you supply the money figures.
Related reading
- What IFRS S2 Paragraph 29(c) actually requires
- Scenario analysis under IFRS S2
- The industries where IFRS S2 pins the metric
- The ESRS E1-9 / E1-11 financial-effects number in detail
- ESRS E1: the full standard
- How ESRS E1 compares with TCFD on physical risk
- CSRD vs ISSB: the broader standards comparison
Frequently asked questions
Do I report physical climate risk twice if I file under both IFRS S2 and ESRS E1?
In effect you report the same underlying number twice, in two shapes. IFRS S2 (Paragraph 29(c)) asks for the amount and percentage of assets exposed to physical risk. ESRS E1 (Disclosure Requirement E1-9) asks for the same figure, then adds detail: a before-adaptation view, a split between sudden and slow hazards, the share already covered by adaptation, asset location, and net revenue at risk. The task is not to pick one. It is to file the shared number, then add the European extras.
Does ESRS E1 require a before-adaptation (gross) figure?
Yes. ESRS E1-9 paragraph 66(a) asks for the assets at risk before considering climate change adaptation actions. IFRS S2 does not state whether its figure is before or after adaptation, so you can present it either way. A before-adaptation (gross) presentation is becoming the market convention, so the two filings reconcile.
Is scenario analysis mandatory under ESRS E1?
Not in the way it is under IFRS S2. IFRS S2 (Paragraph 22) names scenario analysis as something you must run. ESRS E1 names the disclosure of how you used scenario analysis, rather than requiring you to run one. In practice many companies run one anyway, because the forward-looking financial-effect figures need a forward-looking basis.
What does ESRS E1 add to the IFRS S2 physical-risk metric?
On top of the shared amount-and-percentage figure, ESRS E1-9 (the 2023 standard in force) adds a before-adaptation gross view, a split between acute (sudden) and chronic (slow) hazards, the share of assets already covered by adaptation, the location of significant assets, and net revenue at risk. The November 2025 amended draft (E1-11) drops the explicit acute/chronic split and softens asset location to guidance.
Sources
- ESRS E1 (in force). Commission Delegated Regulation (EU) 2023/2772, Annex I, ESRS E1, Disclosure Requirement E1-9, paragraph 66 and paragraph 68; Application Requirement AR 11. EUR-Lex CELEX 32023R2772.
- ESRS E1 (amended draft). EFRAG November 2025 exposure draft, ESRS E1, Disclosure Requirement E1-11, paragraph 38. Not yet adopted by the European Commission.
- ESRS 1 (materiality). Commission Delegated Regulation (EU) 2023/2772, Annex I, ESRS 1, paragraphs 37, 38 and 43 (double, financial and impact materiality).
- IFRS S2. IFRS Foundation, IFRS S2 Climate-related Disclosures, paragraphs 22, 29(c) and 32.
- Interoperability mapping. ESRS-ISSB Standards Interoperability Guidance (EFRAG and IFRS Foundation, 2 May 2024).
- Hazard classification. Commission Delegated Regulation (EU) 2021/2139 (the EU Taxonomy), the source of the acute/chronic climate-hazard table referenced by ESRS E1 AR 11.
