- ESRS E1 is the one climate disclosure that makes you count physical risk, not just describe it. The requirement is ESRS E1-9 in the standard in force today and ESRS E1-11 in the amended draft EFRAG put out in November 2025.
- The physical-risk number has three parts: the value of assets at risk before you count any adaptation, the share of those assets your adaptation covers, and the net revenue that depends on exposed activities.
- The qualitative grace period is ending. Under the standard in force, financial year 2027 is the first year a first-wave company can no longer skip the quantitative number. The amended draft pushes the general deadline to 2029 but carves out the asset figures, which come due regardless.
- Continuuiti produces the asset-level physical-risk assessment and flood-damage estimate the number is built on; your finance team maps its own carrying amounts and revenue onto it.
Why this matters now
Most of the European Sustainability Reporting Standards (ESRS) ask a company to describe its climate risks. One disclosure asks it to count them. That disclosure is the anticipated-financial-effects requirement in ESRS E1, the climate-change standard issued under the EU’s Corporate Sustainability Reporting Directive (CSRD). In the version of E1 in force today it is numbered E1-9. In the amended version EFRAG (the European Financial Reporting Advisory Group, the body that drafts the standards for the European Commission) put out for consultation in November 2025, it becomes E1-11.
Whichever number you use, the physical-risk part of this disclosure asks for three things that are hard to fake. The monetary value of the assets sitting in harm’s way before you do anything to protect them. The share of those assets your adaptation actions actually cover. And the revenue that depends on activities exposed to the physical effects of a changing climate.
This piece walks the physical-risk part of that disclosure, paragraph by paragraph, across both versions of the standard. It is written for a sustainability or finance lead at a company that is filing now, or preparing to.
The one thing to take away: the qualitative grace period is ending. Companies in the first CSRD reporting wave have been allowed to skip the quantitative version of this number for a few years. For the standard as it stands today, the first financial year they can no longer skip it is 2027. The amended draft changes that timeline again, and carves out two data points that have to be reported even during the grace period. Knowing which rule applies to you is the difference between a clean filing and a finding.
What this piece covers, and what it does not
The anticipated-financial-effects disclosure is a bundle. The 2023 version, in its opening paragraph, says the company shall disclose its “anticipated financial effects from material physical risks,” its “anticipated financial effects from material transition risks,” and its “potential to benefit from material climate-related opportunities” (ESRS E1-9, paragraph 64, 2023 issuance).
This piece takes only the first of those three: the physical-risk limb. Transition risk (the financial effects of decarbonisation policy, carbon prices, technology shifts, and the like) and climate-related opportunities (new low-carbon revenue) are real disclosure obligations, but they are a different analysis with a different data set, and they sit outside this piece. Where the standard bundles all three into one paragraph, we read out only the physical-risk clauses and say so.
Where this disclosure sits
Anticipated financial effects is the forward-looking money question in E1. The standard is explicit that it builds on the general disclosures: the 2023 text says the information “is in addition to the information on current financial effects required under ESRS 2 SBM-3” and that its objective is “to provide an understanding of how these risks have (or could reasonably be expected to have) a material influence on the undertaking’s financial position, financial performance and cash flows, over the short-, medium- and long-term” (ESRS E1-9, paragraph 65, 2023 issuance). ESRS 2 is the cross-cutting general-disclosures standard; SBM-3 is its disclosure on material impacts, risks and opportunities and their interaction with strategy.
In plain terms: this is where you translate “we are exposed to flooding and heat” into “here is what that exposure is worth, over three time horizons.” The same paragraph notes that the results of the scenario and resilience analysis you do elsewhere in E1 “should inform” this number. So the financial figure is the downstream output of the risk-identification work (covered in our walk of E1-2) and the resilience work (E1-3). It is the last link in the chain, and the one an investor or a lender reads first.
A note on lineage before we go further. The 2023 issuance is the binding standard today. The November 2025 amended draft is an EFRAG exposure draft; it has not been adopted by the Commission. Until it is, the paragraphs below marked “2023 issuance” are the law, and the paragraphs marked “amended draft” are where the standard is heading.
The binding requirement today: ESRS E1-9, paragraph 66
Here is the physical-risk disclosure as it reads in the standard in force. The 2023 text says the disclosure required by paragraph 64(a) “shall include”:
“(a) the monetary amount and proportion (percentage) of assets at material physical risk over the short-, medium- and long-term before considering climate change adaptation actions; with the monetary amounts of these assets disaggregated by acute and chronic physical risk;
(b) the proportion of assets at material physical risk addressed by the climate change adaptation actions;
(c) the location of significant assets at material physical risk; and
(d) the monetary amount and proportion (percentage) of net revenue from its business activities at material physical risk over the short-, medium- and long-term.”
(ESRS E1-9, paragraph 66, 2023 issuance.)
That is four data points. Read them one at a time.
Point (a): the gross exposure. The money value and the percentage of assets that sit in harm’s way, measured before you count any adaptation action. The asset amounts are split between acute hazards (sudden events such as floods and storms) and chronic hazards (slow shifts such as heat stress and water stress), across short, medium and long time horizons.
In plain terms: show the raw, undefended exposure first. Adaptation comes in the next line, not this one. This “before considering climate change adaptation actions” wording is the point most preparers underestimate, and it has been in the standard since 2023.
Point (b): the adaptation coverage. The share of those at-risk assets that your adaptation actions actually address. Read together with point (a), this is a gross-then-net structure: here is the exposure, and here is how much of it you have done something about.
Point (c): the location. Where the significant at-risk assets are. Physical risk is local; a portfolio number with no geography behind it is not decision-useful, and the standard says so by asking for location directly.
Point (d): the revenue at risk. The money value and percentage of net revenue that comes from business activities exposed to physical risk, again across the three horizons. This is the part that reaches beyond the balance sheet into the income statement: not just “our warehouse floods” but “the revenue that runs through that warehouse is exposed.”
The 2023 standard then adds a step that is easy to miss. Paragraph 68 requires the company to disclose “reconciliations to the relevant line items or notes in the financial statements” of the significant amounts of assets and net revenue at physical risk (ESRS E1-9, paragraph 68, 2023 issuance). In plain terms: the physical-risk numbers are not allowed to float free of the audited accounts; you have to show how they tie back. Hold onto that point, because the amended draft changes it.
What the amended draft does: ESRS E1-11, paragraph 38
The November 2025 amended draft renumbers E1-9 to E1-11 and rewrites the physical-risk clause. The objective paragraph keeps the same connection to ESRS 2: the disclosure is “part of the information on current and anticipated financial effects required under ESRS 2 SBM-3” (ESRS E1-11, paragraph 37, November 2025 amended draft). The substantive paragraph now reads:
“The undertaking shall disclose the anticipated financial effects from material physical risks, including:
(a) the carrying amount of assets at material physical risk before considering climate change adaptation actions, including the relevant time horizons;
(b) the percentage of the (carrying amount of) assets at material physical risk addressed by adaptation actions at the reporting date; and
(c) the monetary amount of net revenue from its business activities at material physical risk, including the relevant time horizons.”
(ESRS E1-11, paragraph 38, November 2025 amended draft.)
The substance is the same three ideas as before: gross exposure, adaptation coverage, revenue at risk. Three changes are worth naming.
The word changed from “monetary amount” to “carrying amount.” The 2023 text said “monetary amount … of assets.” The amended draft says “carrying amount of assets.” Carrying amount is the value at which an asset is recognised in the balance sheet. EFRAG’s own explanation of the change confirms the intent: compared with the 2023 act, “it is clarified that asset-related disclosures are based on carrying amounts recognised at the reporting date” (EFRAG Basis for Conclusions on the draft Amended ESRS, December 2025, paragraph 316). In plain terms: the amended draft anchors the exposure figure directly to a number that already exists in your accounts, rather than leaving “monetary amount” open to interpretation.
The reconciliation requirement was removed. The standalone 2023 requirement to reconcile the physical-risk figures to financial-statement line items is gone. EFRAG explains that “the datapoints on the reconciliations to the relevant line items or notes in the financial statements have been removed,” on the view that users can draw such reconciliations themselves and that connectivity is handled by a general requirement in the amended ESRS 1 (EFRAG Basis for Conclusions, December 2025, paragraph 319). The link to the accounts is not abandoned; an application requirement still says to “disclose net revenue and the carrying amount of assets, making it consistent with the financial statements” (ESRS E1-11, application requirement AR 29(f), November 2025 amended draft). But it moves from a hard reconciliation line item to a consistency principle.
Location dropped from a requirement to a recommendation. The 2023 standard asked for the location of significant at-risk assets as one of its four data points. In the amended draft, location moves into the methodology application requirement. EFRAG records that “the datapoint on location has been considered as having lower priority and moved to AR,” now expressed as including, “where relevant,” the location of physical-risk assets “aggregated in a way that support faithful representation of its risks” (EFRAG Basis for Conclusions, December 2025, paragraph 320; ESRS E1-11, application requirement AR 32, November 2025 amended draft). EFRAG also notes that several board and working-group observers flagged that location information was relevant to their use cases, so the downgrade was not uncontested.
One more addition: the amended draft makes methodology its own disclosure paragraph. The company “shall disclose the methodology applied to quantify the amounts disclosed under paragraphs 38 and 39, including the scope adopted in the calculation, critical assumptions, parameters and limitations” (ESRS E1-11, paragraph 40, November 2025 amended draft). In plain terms: show your working. How you arrived at the number is itself a required disclosure.
Here is the 2023-to-amended mapping for the physical-risk limb at a glance.
| 2023 issuance (E1-9, para 66, in force) | November 2025 amended draft (E1-11, para 38) |
|---|---|
| Monetary amount + % of assets before adaptation, split acute/chronic | Carrying amount of assets before adaptation, with time horizons (para 38(a)) |
| Proportion of assets addressed by adaptation | Percentage of carrying amount addressed by adaptation, at reporting date (para 38(b)) |
| Location of significant at-risk assets (a requirement) | Moved to methodology, “where relevant” (AR 32) |
| Monetary amount + % of net revenue at risk | Monetary amount of net revenue at risk, with time horizons (para 38(c)) |
| Reconciliation to financial-statement line items (para 68) | Removed; replaced by a consistency principle (AR 29(f)) |
| (no 2023 equivalent) | Methodology a standalone disclosure (para 40) |
Why “before adaptation” is a deliberate design choice
The single most distinctive feature of this disclosure is the gross-exposure view: you report the value of assets at risk before counting your adaptation actions, then report the coverage separately. That ordering is not an accident, and EFRAG defended it through the consultation.
Many stakeholders asked whether the figures should be shown before or after risk-mitigation actions. EFRAG’s answer splits the two risk types. For physical risk, it “decided to keep the approach of disclosing before mitigation actions for exposure at physical risk to respond to users’ needs.” For transition risk, by contrast, companies “may report before or after mitigation, as no specification is provided,” because preparers asked for flexibility and “decoupling the exposure from actions is not relevant in all cases” (EFRAG Basis for Conclusions, December 2025, paragraph 317).
In plain terms: for physical risk specifically, the standard wants the raw exposure on the table. A user, typically a lender or investor, wants to see the size of the problem before management’s response, then judge the response on its own terms. A net-only figure hides how much risk the adaptation is actually carrying. EFRAG records that even among the board, one working-group member argued all reporting should be gross, and some members regretted that the simplification lost the general gross approach elsewhere (EFRAG Basis for Conclusions, December 2025, paragraphs 316 and 317). The before-adaptation requirement for physical risk is the part of that argument that survived intact.
EFRAG also clarified how a balance-sheet figure can be forward-looking at the same time: “the amounts at risk (assets and revenues) are reported as of the reporting date,” while “specification of the relevant horizon of the forward-looking events that may put at risk assets and revenues is however required” (EFRAG Basis for Conclusions, December 2025, paragraph 318). In plain terms: the value is today’s carrying amount; what makes it forward-looking is the horizon over which the hazard is expected to bite. You are not revaluing the asset for a future climate; you are flagging today’s value as exposed over a stated horizon.
The phase-in: two timelines and one carve-out
This is where filers get tripped up, because there are two different relief regimes depending on which version of the standard governs your report.
Under the standard in force today, the Wave 1 Quick Fix (a Commission delegated act adopted in July 2025) lets first-wave companies defer the quantitative anticipated-financial-effects information. It allows wave-one undertakings “not to report … until financial year 2027” a list of items that includes “the information prescribed by ESRS 2 SBM-3 paragraph 48(e) (anticipated financial effects)” and “the information prescribed by ESRS E1-9” (Wave 1 Quick Fix delegated act, 2025). In plain terms: if you are a first-wave reporter, financial year 2027 is the first year you can no longer skip the quantitative E1-9 physical-risk number. The qualitative description was always required; the quantity is what the relief covered.
The reasoning behind the relief is worth knowing, because it tells you how stable the deadline is. The Commission noted that the separate “Stop-the-Clock” delay did not postpone first-wave reporting, and that it was not reasonable to force these companies to produce extra information for 2025 and 2026 when the simplified standards “might subsequently modify those same requirements” (Wave 1 Quick Fix delegated act, explanatory memorandum, 2025). So the deferral is a holding measure while the standard is rewritten.
Under the amended draft, the timeline is different and there is a carve-out. EFRAG introduced a further phase-in: first-wave companies “may omit … quantitative information on anticipated financial effects required in ESRS E1-11 for their financial years up to 2029.” But then the exception:
“Exceptionally, the quantitative datapoints specified in paragraphs 38 (a)(b) and 39 (a)(b) are not subject to this phase-in, as they relate to carrying amounts recognised on the balance sheet at the reporting date, subject to forward looking events.”
(EFRAG Basis for Conclusions, December 2025, paragraph 321.)
In plain terms: if the amended draft becomes law in its current form, the general grace period for the E1-11 quantitative numbers runs to financial year 2029. But the two physical-risk data points that matter most are pulled out of it: the carrying amount of at-risk assets before adaptation, and the percentage covered by adaptation (paragraph 38(a) and (b)). They have to be reported regardless, because they are figures already recognised in the balance sheet. The grace period would protect the harder, more forward-looking parts (such as the revenue-at-risk estimate), not the asset numbers you can read off your own books.
Here is the contrast.
| Standard in force (E1-9, Quick Fix) | Amended draft (E1-11, draft amended ESRS 1) | |
|---|---|---|
| Quantitative deferral for Wave 1 | Up to financial year 2027 | Up to financial year 2029 |
| Carve-out from the deferral | None stated for E1-9 | Carrying amount + % covered (para 38(a)(b)) must be reported anyway |
| Qualitative information | Required throughout | Required throughout |
The practical reading: do not assume the amended draft simply buys you two more years. If it is adopted as drafted, the asset-exposure numbers come due immediately, even though the rest can wait. And until it is adopted, the binding rule is the FY 2027 deadline. One working-group member dissented on the amended phase-in as excessive (EFRAG Basis for Conclusions, December 2025, paragraph 321), which is a fair signal that this detail is still moving.
What the number actually needs
Strip away the paragraph numbers and the physical-risk disclosure asks for the same chain of inputs in both versions:
- Where your assets are. Location drives physical risk, and you cannot estimate exposure without it, whether or not location is itself a reported line.
- What hazard each asset faces, over each horizon. Acute and chronic, across short, medium and long term, ideally under a forward-looking climate scenario.
- What that hazard does to the asset in money terms. A depth, a wind speed or a temperature is not a financial effect until it is converted into expected damage.
- Your own carrying amounts and revenue figures, to express the exposure as the standard asks: carrying amount before adaptation, percentage covered, net revenue at risk.
This is where Continuuiti fits, and it is worth being precise about the boundary. Continuuiti produces the asset-level physical-risk assessment that sits underneath the number: hazard exposure by location, scenario and time horizon across twelve physical hazards, and a monetary flood-damage estimate built from published depth-damage curves. The flood-damage estimation uses two independent models: the United States Federal Emergency Management Agency’s HAZUS 4.0 (196 depth-damage curves across 33 building occupancy types, calibrated to United States building stock) and the European Commission Joint Research Centre’s Huizinga 2017 functions (covering 214 countries). The methodology is documented in full at the Continuuiti methodology pages.
What Continuuiti does not do, and what no data provider can do for you, is supply your carrying amounts. The damage models work from replacement value and floor area, not from the accounting carrying amount recognised in your balance sheet. So the real division of labour is this: the platform gives you the exposure and the expected physical damage, asset by asset; your finance team maps that onto the carrying amounts and revenue figures the disclosure asks for. That mapping is what turns a risk assessment into an E1-9 or E1-11 figure.
Two limits are worth stating plainly, because an auditor will ask. The depth-damage curves cover flooding; wind, wildfire and drought are assessed as hazard exposure but are not yet converted into monetary damage, which is a gap across the industry, not unique to any one provider. And the curves estimate physical damage to the building, not business interruption or lost revenue, so the net-revenue-at-risk data point (paragraph 66(d) / 38(c)) needs a revenue-exposure analysis layered on top, not a damage figure alone.
Where to go next
This piece is the financial-effects link in a chain. The exposure that feeds it comes from the risk-identification work, walked in our piece on ESRS E1-2 physical-risk identification, and the resilience analysis that should inform it sits in E1-3. For the high-level shape of the whole standard, see the ESRS E1 overview.
If you also report, or expect to report, under the International Sustainability Standards Board’s IFRS S2, the equivalent there is paragraph 29(c), and the substance of the physical-risk number is close. The before-adaptation gross view is where ESRS asks for more than IFRS S2 does. Continuuiti has separate coverage of the IFRS S2 paragraph 29(c) requirement; the two disclosures answer to the same underlying assessment.
Frequently asked questions
When does a Wave 1 company have to report the quantitative ESRS E1-9 physical-risk number?
Under the standard in force today, financial year 2027. The Wave 1 Quick Fix, a Commission delegated act adopted in July 2025, lets first-wave reporters defer the quantitative anticipated-financial-effects information until then. The qualitative description was always required; only the quantitative figure was deferred.
What does “before considering adaptation actions” mean?
It means you report the gross exposure first: the value of assets sitting in harm’s way before counting any flood walls, relocation, or other adaptation. The share your adaptation actually covers is reported separately, on the next line. EFRAG kept this before-adaptation view for physical risk on purpose, so a user can see the size of the problem before management’s response.
What changed between ESRS E1-9 and E1-11 for physical risk?
Four things. The wording for assets moved from “monetary amount” to “carrying amount,” the value recognised on the balance sheet. The standalone reconciliation to the financial statements was removed and replaced by a consistency principle. Asset location dropped from a required data point to a methodology recommendation. And the methodology itself became its own required disclosure.
Does the amended draft give Wave 1 companies two more years?
Not exactly. The amended draft’s general grace period for the quantitative E1-11 numbers runs to financial year 2029, but the two physical-risk data points that matter most, the carrying amount of at-risk assets before adaptation and the percentage covered by adaptation, are carved out and must be reported regardless, because they are figures already recognised on the balance sheet.
Sources
- Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU as regards sustainability reporting standards (ESRS Set 1, Annex I, ESRS E1). Paragraphs 64, 65, 66 and 68 of Disclosure Requirement E1-9. Available via EUR-Lex, CELEX:32023R2772. The binding standard in force.
- EFRAG draft Amended ESRS E1 (November 2025 exposure draft), Disclosure Requirement E1-11, paragraphs 37, 38 and 40, and application requirements AR 29 and AR 32. Not yet adopted by the European Commission.
- EFRAG Basis for Conclusions accompanying the draft Amended ESRS (December 2025), paragraphs 316 to 321, explaining the carrying-amount clarification, the removal of the reconciliation data point, the downgrade of the location data point, the before-adaptation policy choice for physical risk, the reporting-date and horizon clarification, and the phase-in with its paragraph 38(a)(b) carve-out.
- Commission Delegated Regulation amending Delegated Regulation (EU) 2023/2772 (the “Wave 1 Quick Fix”, adopted July 2025), Section 3 and explanatory memorandum, allowing first-wave undertakings to defer the quantitative ESRS E1-9 and SBM-3 paragraph 48(e) anticipated-financial-effects information until financial year 2027.
- Continuuiti methodology documentation, flood damage estimation (HAZUS 4.0 and JRC Huizinga 2017 depth-damage curves), published at the Continuuiti methodology pages.
