IFRS S2 paragraph 22: disclose the interpretation, not the scenario tables

IFRS S2 Paragraph 22 is the climate resilience disclosure requirement. It is one sentence. The Basis for Conclusions (the standard’s official commentary) clarifies what that sentence actually demands: companies must disclose their interpretation of what the scenario analysis means for the business, not the underlying scenario tables and projections. Many first-wave reporters published the methodology (scenarios, time horizons, assumptions) and stopped short of the interpretation. The interpretation is the disclosure obligation. The methodology is the supporting evidence. This piece walks the two-part structure of Paragraph 22 and the four practical questions reporters must answer.

The Four Questions at a Glance

#	Question	What it asks	Defensible answer anchor	Standard cite
1	What inputs did you use	7 sub-elements (sources, diverse range, transition vs physical, alignment, relevance, time horizons, scope) + 5 assumptions + period	Each sub-element addressed; (4) alignment + (5) relevance most-skipped	Para 22(b)(i)(1)–(7); 22(b)(ii); 22(b)(iii); BC66
2	What did the analysis tell you	5 output sub-elements (strategy implications, uncertainty, financial flexibility, asset redeployment, climate-resilience capex effect)	Interpretation, not raw scenario tables	Para 22(a)(i)–(iii); BC59; BC60
3	What is your floor of compliance	2D matrix self-location: exposure vs skills/capabilities/resources	Quantitative mandate at high-exposure plus high-resources corner; qualitative permitted elsewhere	B17; BC65; factsheet
4	How do you update	Asymmetric: 22(a) annually, 22(b) on strategic planning cycle (3-5 years)	Cycle period disclosed explicitly	B18; BC68

Citation key: “Para” = paragraphs of IFRS S2 (e.g., Para 22, Para 22(a)(i), Para 30); “B” = paragraphs of Appendix B application guidance (e.g., B17, B18); “BC” = paragraphs of the Basis for Conclusions on IFRS S2 (e.g., BC59, BC65, BC66, BC68); “IG” = Industry-based Guidance on Implementing IFRS S2 (cross-referenced where the eight prescribed-metric industries appear).

The paragraph and the two questions hidden in it

Para 22 of IFRS S2 reads, in its operative first sentence:

“An entity shall disclose information that enables users of general purpose financial reports to understand the resilience of the entity’s strategy and business model to climate-related changes, developments and uncertainties, taking into consideration the entity’s identified climate-related risks and opportunities. The entity shall use climate-related scenario analysis to assess its climate resilience using an approach that is commensurate with the entity’s circumstances…”
(IFRS S2, paragraph 22)

A sustainability lead reading this once will conclude that the standard wants a scenario analysis. A sustainability lead reading it twice, with an auditor on the line, will see what is actually being asked. The Basis for Conclusions makes the architecture explicit. Para 22 carries two distinct disclosure aspects:

“information about the entity’s climate resilience to enable users to understand key areas of uncertainty, the implications for the entity’s strategy and business model, and its adaptive capacity; and… information about how the entity has carried out climate-related scenario analysis to inform its assessment of its climate resilience.”
(BC57)

And then BC59, the binding sentence the rest of this piece pivots on:

“the ISSB emphasised that an entity is not required to disclose the results of its scenario analysis, but is instead required to disclose its interpretation of those results.”
(BC59)

That is the structural reframe. Resilience assessment is the OUTPUT of management’s interpretation. Scenario analysis is the analytical INPUT used to inform that interpretation. Para 22(a) requires disclosure of the output. Para 22(b) requires disclosure of the input methodology. They are not the same disclosure obligation, and the standard treats them differently.

An earlier piece in this series read Para 29(c) as four contested questions hidden in one sentence. Para 22 is the same pattern at higher resolution. The paragraph carries 18 disclosure sub-elements when fully decomposed (5 in 22(a), 7 in 22(b)(i), 5 in 22(b)(ii), 1 in 22(b)(iii)), and many early reporters treat the full obligation as one or two narrative paragraphs. A recurring pattern across the first wave of IFRS S2 and AASB S2 disclosures is that the input methodology is partially answered and the output interpretation is skipped. This is what BC59 explicitly says is not enough.

The four contested questions are:

1. What inputs did you use. Para 22(b)(i) lists seven sub-elements: scenarios and sources, diverse range, transition vs physical classification, international agreement alignment, relevance rationale, time horizons, scope of operations. Para 22(b)(ii) lists five assumption sub-elements (non-exhaustive per BC61). Para 22(b)(iii) requires disclosure of the reporting period in which the scenario analysis was carried out.
2. What did the analysis tell you. Para 22(a) lists five output sub-elements: implications for strategy and business model, significant areas of uncertainty, capacity to adjust or adapt across financial resources, asset redeployment, and the effect of current and planned climate-related investments.
3. What is your floor of compliance. B17 imposes a hard quantitative-approach mandate when exposure and skills/capabilities/resources are both high. BC65 closes the resources-as-substitute loophole. The IFRS Foundation factsheet codifies this as a 2D matrix.
4. How do you update. B18 and BC68 establish an asymmetric annual-update rule: resilience assessment outputs update annually; scenario analysis methodology disclosure updates on the strategic planning cycle.

The educational claim is simple. After reading this, a practitioner can articulate the two-aspect split, name the failure mode that BC59 polices against, and pick a defensible position on each of the four questions. Not a perfect position. A defensible one.

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Where Para 22 sits in the standard

Para 22 lives in the Strategy section of IFRS S2, between Para 21 (anticipated financial effects) and Paras 25-26 (risk management). Three documents constrain its interpretation.

The bare act. Para 22 itself plus the operative phrase “see paragraphs B1-B18” that routes the preparer to the Appendix B application guidance. The application guidance is mandatory; B1 confirms it has the same authority as the rest of the standard.

Appendix B B1-B18. Eighteen paragraphs of application guidance organised in three sub-sections. B2-B7 set out the factors an entity considers when assessing its circumstances (exposure plus skills/capabilities/resources). B8-B15 set out the factors the entity considers when determining an appropriate approach (selecting inputs and analytical choices). B16-B18 set out additional factors over time, including the B17 hard-mandate sentence and the B18 asymmetric annual-update rule.

BC57-BC69. Thirteen paragraphs of basis for conclusions. BC57 codifies the two-aspect structure of Para 22. BC59 establishes the binding interpretation-not-results disclosure obligation. BC62 and BC63 record the explicit rejection of an opt-out clause for scenario analysis. BC64 documents the TCFD legacy of the application guidance. BC65 formalises the resources-as-substitute closing argument. BC66 partially defines “diverse range.” BC67 records that international-agreement alignment is voluntary-use, mandatory-disclosure. BC68 confirms the asymmetric annual-update rule.

Two further documents do not constrain Para 22 in a binding sense but shape how preparers and auditors read it. The ISSB’s January 2023 scenario analysis staff paper (Agenda Reference 4A) is the document that fed the B1-B18 application guidance. The IFRS Foundation’s Climate Scenario Analysis Factsheet (March 2026) is educational material that visualises the two-leg circumstance test as a 2D matrix and codifies the three-step process. Both are non-binding. Both are informative for picking-position discipline.

Cross-framework note. The ESRS equivalent (E1-2 paragraph 16 in the November 2025 amended draft, IRO-1 paragraph 21 in the 2023 binding standard) treats scenario analysis as conditional rather than mandatory, the deliberate EFRAG divergence from IFRS S2. See the ESRS E1-2 physical risk identification methodology walkthrough for the Basis for Conclusions 285 rationale.

The 18-sub-element decomposition of Para 22 maps onto the four-question scaffold as follows:

• Question 1 (inputs): Para 22(b)(i) sub-elements 1-7 plus B11-B13 plus the staff paper’s input architecture.
• Question 2 (outputs): Para 22(a) sub-elements 1-5 plus BC59 plus BC60.
• Question 3 (floor of compliance): B17 plus BC65 plus the factsheet 2D matrix plus the staff paper’s three-stage progression.
• Question 4 (update cadence): B18 plus BC68 plus the factsheet asymmetric callout.

The paragraph is dense but not opaque. The architecture is in the standard. The next four sections walk each question.

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Question 1: What inputs did you use

Para 22(b)(i) requires disclosure of seven specific input sub-elements, not a single narrative paragraph. The seven are:

1. “which climate-related scenarios the entity used for the analysis and the sources of those scenarios” (Para 22(b)(i)(1));
2. “whether the analysis included a diverse range of climate-related scenarios” (Para 22(b)(i)(2));
3. “whether the climate-related scenarios used for the analysis are associated with climate-related transition risks or climate-related physical risks” (Para 22(b)(i)(3));
4. “whether the entity used, among its scenarios, a climate-related scenario aligned with the latest international agreement on climate change” (Para 22(b)(i)(4));
5. “why the entity decided that its chosen climate-related scenarios are relevant to assessing its resilience…” (Para 22(b)(i)(5));
6. “the time horizons the entity used in the analysis” (Para 22(b)(i)(6)); and
7. “what scope of operations the entity used in the analysis (for example, the operating locations and business units used in the analysis)” (Para 22(b)(i)(7)).

A defensible Para 22(b)(i) disclosure addresses each of the seven. The cohort pattern across early reporters is uneven coverage. Sub-elements (4) international-agreement alignment and (5) why-relevant rationale are the most-skipped. Sub-element (2) diverse range is the most-attempted-but-weakest, with cohort entities often picking two or three scenarios from the same source family rather than spanning materially different outcomes. Sub-elements (1) sources, (3) transition-vs-physical classification, (6) time horizons, and (7) scope of operations get more variable treatment but are addressed more reliably than (4) and (5).

Para 22(b)(ii) then lists five assumption sub-elements (climate policies in operating jurisdictions, macroeconomic trends, national- or regional-level variables, energy usage and mix, technology developments). BC61 confirms the list is non-exhaustive: an entity might make additional material assumptions that should be disclosed. Para 22(b)(iii) closes the methodology disclosure with the reporting period in which the scenario analysis was carried out.

“Diverse range” partial definition. BC66 is the closest the standard comes to defining “diverse range”:

“IFRS S2 also requires disclosure of whether a diverse range of climate-related scenarios was used in the analysis, meaning entities are required to disclose information such as the number of scenarios used and whether the scenarios cover different outcomes or pathways. For example, if an entity considered both orderly and disorderly transition scenarios, the entity could disclose that fact.”
(BC66)

Two-criterion test: number plus different outcomes/pathways. Not a hard count. IFRS S2 stayed directional.

Cross-jurisdictional reference: New Zealand’s XRB went bright-line at three scenarios under the NZ Climate Standards. Deloitte’s review of the Australian Wave 1 cohort observed that “over half” of first-wave entities disclosed more than the minimum required scenarios, and that entities relied on IPCC, NGFS, or IEA reference pathways. The count question is generally answered. The harder question, whether the chosen scenarios cover materially different outcomes or pathways, is where the cohort thins out. A two-scenario set drawn from the same source family (for instance, two scenarios from the same NGFS Phase IV release) meets the count test but raises a question about the outcomes/pathways test. This second observation is Continuuiti’s analytical reading of the BC66 language, not Deloitte’s claim.

Floor of compliance for scenario count. B12 permits “one or more” scenarios with a reasonable and supportable basis. Single-scenario disclosure is technically permitted under the standard. The reasonable-and-supportable basis must be disclosed. A defensible single-scenario disclosure ties the chosen scenario to the entity’s particular risk geography and explains why a single scenario is sufficient given that exposure profile. The single-scenario-without-rationale pattern is not defensible.

Canonical scenario sources. The ISSB scenario analysis staff paper (January 2023, Para 19) names three canonical authoritative sources: the International Energy Agency (IEA), the Intergovernmental Panel on Climate Change (IPCC), and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). For physical-risk scenario sets, the dominant pickings are the IPCC SSP-RCP combinations from CMIP6, the older RCP-only combinations from CMIP5, and the NGFS Phase IV scenarios (which combine SSP-RCP physical risk projections with policy and macroeconomic pathways). Custom or vendor-internal scenarios are permitted under B12 but require explicit relevance rationale per B12 and B13.

International-agreement alignment. Para 22(b)(i)(4) requires disclosure of whether the entity used a scenario aligned with the latest international agreement on climate change (the Paris Agreement, currently). BC67 explicitly considered and rejected a mandate to use such a scenario. Alignment-use is voluntary; alignment-disclosure is mandatory. Reporters skipping this sub-element fail Para 22(b)(i) on a known-and-named omission. The disclosure can be one sentence: yes (and which scenario), or no (and the rationale for the picked scenario set covering the resilience question without an explicitly Paris-aligned pathway).

TCFD legacy. B1 carries a footnote acknowledging that the application guidance B1-B18 “draws on the range of practice outlined in documents published by the Task Force on Climate-related Financial Disclosures (TCFD), including Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities (2017) and Guidance on Scenario Analysis for Non-Financial Companies (2020)”. BC64 confirms the same. A reporter migrating from a TCFD-aligned scenario analysis report to Para 22 disclosure inherits methodology under B1-B18 but does not automatically clear the Para 22(a) output disclosure obligation that BC59 imposes. The 22(b) input methodology is largely carry-forward; the 22(a) output interpretation is generally new work for reporters previously disclosing only TCFD-aligned methodology.

Cross-reference to industry-based metrics. For the eight industries the IBG routes via Para 32 (Real Estate, Mortgage Finance, Insurance, Water Utilities, Hotels, Health Care Delivery, Managed Care, Forestry Management), the IBG topic codes prescribe specific scenario sources for the topic-level metric. IF-RE-450a.2 specifies IEA World Energy Outlook scenarios for the Real Estate climate-change risk-and-opportunity narrative. FN-IN-450a.1 mandates TCFD Insurance Industry Supplemental Guidance scenario alignment for insurer Probable Maximum Loss disclosure. RR-FM-450a.1 cross-references the IPCC Climate Scenario Process for forestry. Outside the eight industries, scenario source picking is open subject to B12-B13. The narrowing pattern is walked in detail in a companion piece on the eight industries with prescribed physical-risk metrics.

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Question 2: What did the analysis tell you

Para 22(a) requires disclosure of the entity’s assessment of its climate resilience as at the reporting date. The standard structures this around three sub-elements (i, ii, iii), with sub-element (iii) decomposed into three further components (1, 2, 3). Five disclosure obligations result:

1. “the implications, if any, of the entity’s assessment for its strategy and business model, including how the entity would need to respond to the effects identified in the climate-related scenario analysis” (Para 22(a)(i));
2. “the significant areas of uncertainty considered in the entity’s assessment of its climate resilience” (Para 22(a)(ii));
3. “the availability of, and flexibility in, the entity’s existing financial resources to respond to the effects identified in the climate-related scenario analysis…” (Para 22(a)(iii)(1));
4. “the entity’s ability to redeploy, repurpose, upgrade or decommission existing assets” (Para 22(a)(iii)(2)); and
5. “the effect of the entity’s current and planned investments in climate-related mitigation, adaptation and opportunities for climate resilience” (Para 22(a)(iii)(3)).

BC59 carries the binding sentence on what is being asked here:

“the ISSB emphasised that an entity is not required to disclose the results of its scenario analysis, but is instead required to disclose its interpretation of those results.”
(BC59)

This is the load-bearing sentence in Para 22 interpretation. The standard does not ask the entity to publish its scenario tables, its temperature pathways, or its peril-by-peril hazard matrices. It asks the entity to disclose what management concluded those tables mean for the strategy and business model. The interpretation is the disclosure obligation. The tables are the supporting evidence.

The failure mode this polices against is concrete. A reporter who discloses three NGFS scenario tables, three temperature pathways, three RCP mappings, and stops there has produced a methodology disclosure. The 22(a) output disclosure is missing. Per BC59, what management interpreted from those tables is the disclosure that Para 22(a) requires. The cohort pattern across the first wave is that the 22(a) output disclosure is systematically less developed than the 22(b) input methodology disclosure. The more common pattern is to leave the 22(a) sub-elements implicit, which leaves an auditor with nothing to mark against.

Significant areas of uncertainty (Para 22(a)(ii)). The most-defensible-but-most-rarely-disclosed sub-element. BC60 carries the ISSB’s own example:

“the entity might disclose that its resilience assessment is subject to significant uncertainty arising from the effects of future climate-driven migration, which might affect the stability of its supply chain or the resilience of its assets and operations in particular geographies.”
(BC60)

This is a hard sentence to write because it requires the entity to name what it does not know. The first wave’s pattern is to skip it or to substitute a generic statement about model uncertainty. A defensible 22(a)(ii) disclosure is specific to the entity’s risk geography and business model, names two or three uncertainty drivers, and states the magnitude of effect on the resilience claim that those uncertainties create. Defensible driver examples include:

• regional precipitation pattern shifts beyond CMIP6 ensemble agreement;
• sea-level-rise high-end tail under SSP5-8.5;
• supply-chain second-order effects from heat stress in upstream regions.

Capacity to adjust or adapt (Para 22(a)(iii)). The three sub-elements of 22(a)(iii) connect directly to Para 29(e) capital deployment in the cross-industry metric categories. A reporter who runs Para 22(a)(iii)(3) properly produces a paragraph that describes the effect of current and planned investments in climate-related adaptation; the same paragraph supports the Para 29(e) physical-resilience capital-deployment metric. The two paragraphs should be cross-referenced rather than written independently. A reporter writing them independently typically ends up with two narratives that contradict each other on the materiality of climate-related capex.

The defensibility argument. A reporter cannot defend a resilience claim on the basis of scenario tables alone. The standard’s binding language at BC59 is that the disclosure obligation is the management interpretation of those tables. A reviewer assessing Para 22 compliance, whether internal audit, external auditor, or a regulator’s enforcement team, will look for the management interpretation, not the methodology. The methodology disclosure is the supporting evidence the reviewer uses to test the interpretation; it is not the disclosure itself. Reporters treating the methodology as the disclosure are misreading the load-bearing sentence in BC59.

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Question 3: What is your floor of compliance

The standard handles the question of how sophisticated a scenario analysis has to be through a two-leg circumstance test plus a hard mandate at the top of the test.

The two-leg circumstance test. B2 establishes that an entity uses an approach to scenario analysis that is “commensurate with its circumstances” and that those circumstances are assessed by reference to two factors: the entity’s exposure to climate-related risks and opportunities (B4-B5), and the skills, capabilities and resources available to the entity (B6-B7). B4 sets the soft direction:

“…with all else being equal—the greater the entity’s exposure to climate-related risks or opportunities, the more likely it is the entity would determine that a more technically sophisticated form of climate-related scenario analysis is required.”
(B4)

This is directional language, not bright-line. The bright line comes one paragraph later.

The B17 hard mandate. B17 ends with a sentence that is unambiguous:

“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 to climate-related scenario analysis.”
(B17)

Two legs of the test, both met, equals quantitative approach required. This is the auditor lever. It mirrors the B17 role for Para 29(c) walked in a companion piece: when both legs are met, the proportionality clause does not save the reporter from a quantitative approach.

The BC65 closing-loophole sentence. BC65 forecloses the “we lack the internal skills to do this” defense:

“if an entity’s climate-related risk exposure warrants a more sophisticated approach to scenario analysis, the entity cannot use a lack of skills or capabilities to justify using a less sophisticated approach if it has the resources available to obtain or develop those skills or capabilities.”
(BC65)

If the resources are available, the entity is treated as having the skills, because the skills are obtainable. This is the resources-as-substitute clause. A reporter with material climate exposure and a balance sheet that supports investment in scenario analysis cannot anchor a qualitative-only disclosure on internal capability gaps. The standard does not permit it.

The factsheet 2D matrix. The IFRS Foundation’s March 2026 Climate Scenario Analysis Factsheet codifies B17 and B6 as a 2D matrix:

• Vertical axis: exposure to climate-related risks and opportunities (low to high).
• Horizontal axis: skills, capabilities, and resources available (low to high).
• The diagonal arrow points from bottom-left (low exposure plus low skills, simpler approach permitted) to top-right (high exposure plus high skills/capabilities/resources, more advanced approach required per B17).
• Bottom-right (high skills, low exposure) and top-left (high exposure, low skills, but resources available) both fall under the BC65 framing in different ways: the former permits a simpler approach under the commensurate-with-circumstances test; the latter cannot anchor on lack of skills.

Exposure	Skills/capabilities/resources	Required approach	Standard cite
Low	Low	Simpler approach permitted (qualitative scenario narrative)	B15; BC63
Low	High	Simpler approach permitted under commensurate-with-circumstances test	B2; B4
High	Low (but resources to obtain)	Cannot anchor on lack of skills (resources-as-substitute clause)	BC65
High	High	More advanced quantitative approach required (hard mandate)	B17

The factsheet is educational material, not part of the bare act. The 2D matrix it draws is a reading aid for B17 plus BC65. Continuuiti’s recommendation, not a standard mandate, is that every reporter discloses where it sits on this matrix and why, with explicit reference to its exposure assessment and its skills/capabilities/resources assessment. The B17 hard mandate is the standard mandate; the matrix self-location is the disclosure picking position that makes the B17 compliance check auditable.

The staff paper three-stage progression. The January 2023 staff paper carries a three-stage maturity model: just beginning (qualitative scenario narratives, focused boundary), gaining experience (quantitative information illustrating pathways and outcomes for the entity as a whole), advanced experience (greater rigour and entity-specific quantitative outputs). The model is TCFD-derived and was an input to the B1-B18 application guidance. It is not in the bare act. Reporters claiming an early-stage capability profile should self-locate on this continuum and disclose where they sit and why. This is a picking-position discipline, not a standard mandate.

The counterweight: quantification without narrative. The staff paper carries a warning that should not be lost in interpretation:

“an excessive focus on quantification can impair strategic thinking. If an entity has not established a clear and logical scenario ‘narrative’ reflecting the conceptual relationships between the key drivers, constraints, pathways and potential outcomes, then a rush to quantification may serve only to put an ever-finer point on an ineffective tool.”
(ISSB scenario analysis staff paper, January 2023, Para 22)

The standard does not equate “more numbers” with “more compliance.” Quantification rests on narrative. A reporter producing dense quantitative tables without an articulated scenario narrative is failing the underlying objective even if the numbers look sophisticated. The B17 mandate kicks in at the high-exposure plus high-skills corner of the matrix, not at every corner. Lower-exposure preparers are explicitly permitted to use qualitative narrative under B15 and BC63.

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Question 4: How do you update

B18 establishes the asymmetric annual-update rule:

“the entity might carry out its climate-related scenario analysis in line with its strategic planning cycle, including a multi-year strategic planning cycle (for example, every three to five years). Therefore, in some reporting periods the entity’s disclosures in accordance with paragraph 22(b) could remain unchanged from the previous reporting period if the entity does not conduct a scenario analysis annually. The entity shall—at a minimum—update its climate-related scenario analysis in line with its strategic planning cycle. However, an assessment of the entity’s resilience is required to be carried out annually…”
(B18)

BC68 confirms the same architecture: the information required by 22(a) is updated each reporting period; the information required by 22(b) may remain unchanged across periods if scenario analysis was not carried out in the period.

The update asymmetry, explicitly. Resilience assessment outputs (Para 22(a)) update annually. Scenario analysis methodology disclosure (Para 22(b)) updates on the strategic planning cycle, with three to five years as the example range. A reporter running scenario analysis on a three-year cycle satisfies the standard if 22(b) remains unchanged across two non-cycle reporting periods, provided the resilience assessment in 22(a) is refreshed each period to reflect updated insight.

The picking position. A reporter running a multi-year scenario analysis cycle should disclose the cycle period explicitly: that 22(b) carries forward for the next two reporting periods, that 22(a) updates each year on top, and that the next scenario analysis is scheduled for the year that completes the cycle. The cycle-period disclosure is Continuuiti’s recommendation; the asymmetric annual-update rule itself is the standard mandate per B18 and BC68. A recurring cohort pattern is that reporters running multi-year cycles do not name the cycle period in the methodology section, which leaves a reader guessing whether the disclosure is intentionally carried forward or simply not refreshed.

The circular-logic resolution. The staff paper Para 27 acknowledges what looks like circular logic in the B2-B7 framework:

“the staff acknowledges that considering the degree of the entity’s exposure to climate-related risks and opportunities in order to determine the approach to climate-related scenario analysis may be perceived as implying a ‘circular logic’. In its October 2022 meeting, the ISSB decided to require entities to disclose whether and how they use climate-related scenario analysis to inform the identification of climate-related risks and opportunities. Although those two considerations may seem directionally opposed, the staff emphasises that risk management and strategic planning are not linear, sequential exercises but rather involve an ongoing, iterative process.”
(ISSB scenario analysis staff paper, January 2023, Para 27)

Scenarios both inform risk identification and are calibrated to identified risks. The resolution is iteration, not a linear pipeline. For Para 22(b) disclosure this means the methodology section reasonably carries language about how the scenario picks were informed by the entity’s risk register from prior periods, and how the current scenario outputs are now informing the risk register for the next period. That cross-temporal linkage is part of what the ISSB asked for in its October 2022 decision.

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The proportionality clause and the opt-out that does not exist

Para 22’s own operative paragraph carries the proportionality lever for scenario analysis. The entity must use “an approach that is commensurate with the entity’s circumstances” (Para 22). B1 elaborates:

“The entity is required to use an approach to climate-related scenario analysis that enables it to consider all reasonable and supportable information that is available to the entity at the reporting date without undue cost or effort.”
(B1)

B2-B7 set out how to assess what is commensurate: the two-leg circumstance test of exposure plus skills/capabilities/resources. That language is one half of the Para 22 proportionality test. The other half is B17 plus BC65: high exposure plus skills/capabilities/resources available equals quantitative mandate. A reporter invoking proportionality without disclosing where it sits on the B17 framework is giving up the defensible position. The commensurate-with-circumstances language does not carve out the B17 mandate; it bounds the effort involved in meeting the mandate at the lower-exposure end of the matrix. Reporters at the high-exposure end with resources available do not get to substitute proportionality for B17 compliance.

A common cohort error: anchoring on Para 30. Para 30 of IFRS S2 reads:

“In preparing disclosures to meet the requirements in paragraph 29(b)–(d), an entity shall use all reasonable and supportable information that is available to the entity at the reporting date without undue cost or effort.”
(Para 30)

The reasonable-and-supportable language is identical to B1’s, but Para 30’s verbatim text limits itself to the cross-industry metrics under Para 29(b)–(d). It does not directly govern Para 22 disclosures. The same reasonable-and-supportable principle flows into Para 22 via B1 and via Para 22’s own commensurate-with-circumstances language. Reporters who cite Para 30 as the proportionality basis for thin Para 22 disclosure are anchoring on the wrong paragraph; the underlying principle is the same, but the binding text for Para 22 is B1 plus the Para 22 operative paragraph, and that text routes proportionality through the B2-B7 two-leg test rather than through an “undue cost or effort” carve-out. The same reasonable-and-supportable principle also appears at Para 11 (risk identification) and Para 18 (anticipated financial effects). It is a standing principle in the standard, not a Para-30-only carve-out.

The opt-out that was explicitly removed. The Exposure Draft of IFRS S2 proposed an “unable to do so” opt-out clause for scenario analysis. The ISSB explicitly considered and rejected it. BC62 records the discussion:

“The Exposure Draft proposed that an entity would be required to use climate-related scenario analysis to assess its climate resilience unless it is ‘unable to do so’. This proposed requirement would have allowed an entity to use an alternative method to assess its climate resilience if it is unable to use climate-related scenario analysis… Some respondents were concerned that the wording would allow entities to opt out of using climate-related scenario analysis. Others were unclear about what criteria to consider in determining whether an entity is ‘able’ or ‘unable’ to carry out climate-related scenario analysis.”
(BC62)

BC63 records the ISSB’s decision:

“The ISSB decided to remove the wording ‘unable to do so’ from the requirements on climate resilience in IFRS S2 and to confirm that an entity is required to use climate-related scenario analysis to assess its climate resilience. The ISSB also decided to clarify that climate-related scenario analysis encompasses a range of practices, from qualitative scenario narratives to sophisticated quantitative modelling…”
(BC63)

Two implications. First, a reporter cannot anchor a Para 22 omission on capacity grounds. Scenario analysis is mandatory. Second, the standard explicitly recognises that scenario analysis includes qualitative narratives at the lower end of the maturity spectrum. A small or low-exposure entity is not exempt; it is permitted to use a qualitative scenario narrative and it must disclose what that narrative says, what scenarios it considered, and what it interpreted from the analysis under Para 22(a).

The cohort pattern in the first wave is a soft version of the rejected opt-out. Many reporters anchor on Para 30 proportionality language to justify a thin Para 22 disclosure, without engaging the B17 plus BC65 architecture that determines whether proportionality applies in their specific case. That positioning is not stable on either ground: Para 30’s verbatim text limits to 29(b)–(d), and the standard’s binding language at BC63 is that the scenario-analysis opt-out was removed. Reporters who substitute generic proportionality language for the B17 framework in year one are accumulating disclosure debt that auditors will sharpen on in years two and three.

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The picking-positions checklist

#	Picking position	Mandate type	Standard cite
1	Run at least three scenarios spanning materially different warming outcomes	3-count: Continuuiti recommendation. Two-criterion test: standard mandate.	BC66
2	Name scenario sources verbatim (IPCC SSP-RCP, NGFS Phase IV, IEA NZE, custom)	Naming: standard mandate. Rationale-for-picks: Continuuiti recommendation.	Para 22(b)(i)(1); staff paper Para 19
3	Define time horizons explicitly + at least one 2050+ horizon	Horizon disclosure: standard mandate. 2050+ coverage: Continuuiti recommendation.	Para 22(b)(i)(6); Para 10(c)-(d)
4	Disclose the resilience interpretation, not just the methodology	Standard mandate	BC59
5	Address international-agreement-alignment sub-element explicitly	Standard mandate (alignment-disclosure mandatory; alignment-use voluntary)	Para 22(b)(i)(4); BC67
6	Position the entity on the B17 + factsheet matrix and disclose the locating rationale	B17 hard mandate: standard. Matrix self-location: Continuuiti recommendation.	B17; factsheet
7	Disclose the asymmetric annual-update pattern (cycle period explicit)	Asymmetric rule: standard. Cycle-period naming: Continuuiti recommendation.	B18; BC68

Before the disclosure goes to the auditor, run the four questions one more time. Seven items, in order.

1. Run at least three scenarios spanning materially different warming outcomes. For physical risk, the dominant pickings are:

   • CMIP5 RCP combinations (for instance, RCP2.6 low-warming, RCP4.5 intermediate, RCP8.5 high-warming);
   • IPCC SSP-RCP combinations from CMIP6 (subject to the SSP1-2.6 data-availability constraint noted in §9);
   • NGFS Phase IV scenarios with their underlying RCP mappings disclosed.

   BC66’s two-criterion partial definition of “diverse range” is met by three scenarios covering different outcomes. Two scenarios from the same source family (for instance, two scenarios from the same NGFS Phase IV release) meet the count test but raise the outcomes/pathways question. Three scenarios is Continuuiti’s recommendation; the standard mandate is BC66’s two-criterion test.

2. Name the scenario sources verbatim. IPCC SSP-RCP combinations, NGFS Phase IV scenarios, IEA NZE 2050, custom or vendor-internal. Per the staff paper Para 19, IEA, IPCC, and NGFS are the canonical authoritative sources. Custom scenarios require explicit relevance rationale per B12 and B13. The naming is the standard mandate per Para 22(b)(i)(1); the rationale for picking the named sources over alternatives is the disclosure that distinguishes a defensible methodology section from a thin one.

3. Define the time horizons explicitly and tie them to the entity’s strategic planning cycle plus at least one 2050+ horizon. Para 22(b)(i)(6) requires disclosure of the time horizons used; Para 10(c)-(d) requires the entity’s short, medium, and long-term horizon definitions cross-referenced to the strategic planning cycle. For physical risk, IPCC convention is short (2030), medium (2040), long (2050), with sensitivity analysis at 2070 or 2100 where the entity’s asset life supports it. Disclosure of horizons used is the standard mandate; the 2050+ coverage recommendation is Continuuiti’s, anchored to physical-asset life.

4. Disclose the resilience interpretation, not just the methodology. BC59 binding sentence is the auditor lever. The Para 22(a) output disclosure is what the standard requires. The Para 22(b) input methodology disclosure is the supporting evidence. Reporters skipping the 22(a) output disclosure, or substituting it with the 22(b) methodology section, are misreading the load-bearing sentence in BC59. This item is the standard mandate, not a recommendation.

5. Address the international-agreement-alignment sub-element explicitly. Para 22(b)(i)(4) requires disclosure of whether the entity used a scenario aligned with the latest international agreement. BC67 confirms alignment-use is voluntary; alignment-disclosure is mandatory. Skipping this sub-element is a known-and-named omission. The disclosure can be one sentence; the omission is not defensible. Standard mandate.

6. Position the entity on the B17 plus factsheet matrix and disclose where it sits and why. High exposure plus skills/capabilities/resources available equals quantitative approach required. The matrix self-location is Continuuiti’s recommendation for making the B17 compliance check auditable; the B17 hard mandate is the standard mandate. Disclose the locating rationale on both legs (the exposure leg and the skills/capabilities/resources leg), not just the chosen approach.

7. Disclose the asymmetric annual-update pattern. Resilience assessment updates annually; scenario analysis methodology updates on the strategic planning cycle (BC68 plus B18). For multi-year cycles, name the cycle period explicitly and indicate which reporting period in the cycle the current disclosure represents. The asymmetric annual-update rule is the standard mandate; the cycle-period disclosure is Continuuiti’s recommendation that makes the asymmetry legible to readers.

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Honest gaps

The Para 22 architecture narrows the scenario analysis disclosure problem. It does not eliminate it. Four honest gaps deserve disclosure under the Para 22 commensurate-with-circumstances framework, anchored by B1’s reasonable-and-supportable language.

TCFD legacy carries forward but does not equal Para 22 compliance. B1’s footnote and BC64 confirm that the application guidance B1-B18 draws on TCFD’s 2017 Technical Supplement and 2020 Guidance for Non-Financial Companies. A reporter migrating from a TCFD-aligned report inherits methodology under B1-B18. The 22(a) output disclosure obligation that BC59 imposes is not part of that inheritance because TCFD did not require disclosure of management’s interpretation of scenario results in the same binding terms. The migration is partially carry-forward; the 22(a) interpretation half is generally new work for reporters previously disclosing only TCFD-aligned methodology.

“Diverse range” remains directional, not bright-line. BC66 partially defines the term as a two-criterion test (number of scenarios plus whether the scenarios cover different outcomes/pathways). It does not specify a count. New Zealand’s XRB went bright-line at three scenarios under the NZ Climate Standards. IFRS S2 stayed directional. Reporters in jurisdictions that adopt IFRS S2 verbatim (the United Kingdom under UK SRS S2, Australia under AASB S2) inherit the directional framing. Reporters in jurisdictions with a bright-line overlay should disclose the overlay alongside their IFRS S2 compliance position.

International-agreement alignment is voluntary-disclosure-of-whether-used, not mandatory-use. BC67 explicitly considered and rejected a mandate to use a scenario aligned with the latest international agreement. Reporters must disclose whether they used such a scenario; they are not required to use one. The cohort pattern is to assume alignment-use is mandated and either pick an aligned scenario by default or skip the disclosure entirely. Both positions are recoverable once the standard’s actual text is read. Picking a non-aligned scenario set with explicit rationale is also defensible.

Climate model constraints at the source-data level. The NEX-GDDP-CMIP6 climate model collection used by most physical-risk vendors does not include SSP1-2.6. Climate Risk modelling typically uses SSP2-4.5 (intermediate) plus SSP5-8.5 (high) only. Sea-level-rise projections are the SSP1-2.6 exception, sourced separately via IPCC AR6. Reporters wanting the full SSP family for asset-level hazard projection face a methodological constraint at the source data collection level, not at any vendor’s level. A second methodological constraint sits at the model-choice level. Multi-model ensemble queries time out at cloud-scale geospatial infrastructure budgets, so most vendors run a single global climate model with a fallback chain (for instance, ACCESS-CM2 as primary, with MPI-ESM1-2-HR, MIROC6, CanESM5, and UKESM1-0-LL as fallbacks). Single-model output does not capture the full range of inter-model uncertainty. B1’s reasonable-and-supportable disclosure framework should name both constraints and the model used, acknowledge the single-model limitation, and report results as point estimates rather than as ensemble ranges. This belongs in Para 22(b)(ii) under the assumptions about “national- or regional-level variables” (Para 22(b)(ii)(3)). The cohort pattern is to disclose neither constraint.

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Sources cited

Standard text and Basis for Conclusions

• IFRS Foundation, IFRS S2 Climate-related Disclosures (June 2023, as amended December 2025). Para 22 (operative paragraph), Para 22(a)(i)-(iii), Para 22(b)(i)(1)-(7), Para 22(b)(ii)(1)-(5), Para 22(b)(iii), Para 30 (proportionality clause).
• IFRS S2 Appendix B, paragraphs B1-B18 (application guidance for Para 22). B1 (TCFD legacy footnote), B2-B7 (assess circumstances: exposure plus skills/capabilities/resources), B8-B15 (determine appropriate approach), B16-B18 (additional considerations). B17 hard-mandate sentence and B18 asymmetric annual-update rule cited at length.
• Basis for Conclusions on IFRS S2, paragraphs BC57-BC69. BC57 (two-aspect structure), BC59 (interpretation-not-results binding sentence), BC60 (uncertainty disclosure example), BC61 (assumption list non-exhaustive), BC62-BC63 (rejected opt-out), BC64 (TCFD legacy at BC level), BC65 (resources-as-substitute closing sentence), BC66 (diverse range partial definition), BC67 (alignment-use voluntary, alignment-disclosure mandatory), BC68 (asymmetric annual-update at BC level).

ISSB educational material

• IFRS Foundation, Climate Scenario Analysis Factsheet (March 2026). Three-step process diagram and 2D matrix codifying B17.
• IFRS Foundation, Scenario Analysis Staff Paper (January 2023, Agenda Reference 4A). Three-stage progression model (just beginning / gaining experience / advanced experience), Figure 2 input/output architecture, Para 19 canonical sources (IEA / IPCC / NGFS), Para 22 quantification-without-narrative warning, Para 27 circular-logic resolution.

TCFD legacy (referenced by B1 footnote and BC64)

• TCFD, Technical Supplement: The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities (2017).
• TCFD, Guidance on Scenario Analysis for Non-Financial Companies (2020).

Cohort reviews of first-wave IFRS S2 / AASB S2 disclosures

• Deloitte Australia, Early insights into Wave 1 of Australian climate reporting (2026). Verbatim cited for the “over half” observation on scenario count. https://www.deloitte.com/au/en/services/audit-assurance/analysis/early-insights-wave-1-australian-climate-reporting.html
• KPMG Australia, AASB S2 First Impressions (FAST 30 dashboard tracking AU Group 1 mandatory reporters, February-March 2026). https://kpmg.com/au/en/insights/financial-reporting/sustainability-climate-change/aasb-s2-climate-disclosures.html
• SLR Consulting, What companies can learn from the first statements under New Zealand’s mandatory climate-related disclosures (2024 review of NZ CS-aligned disclosures, NZ FMA proxy). XRB three-scenario bright-line cited for cross-jurisdictional reference. https://www.slrconsulting.com/us/insights/what-companies-can-learn-from-the-first-statements-under-new-zealand-s-mandatory-climate-related/
• Westpac IQ, Sustainability Impact February-March 2026 (covering KPMG FAST 30 governance and emissions stats). https://www.westpaciq.com.au/thought-leadership/2026/04/sustainability-impact-february-march-2026-what-you-need-to-know

Companion pieces and methodology references

• What IFRS S2 Paragraph 29(c) actually requires (Continuuiti, May 2026). Companion piece on the four contested questions in Para 29(c).
• IFRS S2: 8 industries with prescribed physical-risk metrics (Continuuiti, May 2026). Cross-referenced for the IBG-450a sector scenario picking.
• Continuuiti Climate Risk methodology and Flood Depth methodology (public methodology pages). Climate Risk page covers the 12-hazard 1-5 rating scale and ACCESS-CM2 single-model approach with fallback chain. Flood Depth page covers the JRC GloFAS plus WRI Aqueduct ratio method and 7 quality flags.

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Frequently asked questions

What does IFRS S2 paragraph 22 require?

Paragraph 22 requires the entity to disclose information that enables users to understand the resilience of its strategy and business model to climate-related changes, and to use climate-related scenario analysis to assess that resilience. The Basis for Conclusions at BC57 makes the architecture explicit: paragraph 22 carries two distinct disclosure aspects. Paragraph 22(a) requires the entity to disclose its assessment of climate resilience as at the reporting date (five output sub-elements). Paragraph 22(b) requires the entity to disclose how it carried out scenario analysis to inform that assessment (seven input sub-elements plus five assumption sub-elements plus the reporting period). The two are not the same disclosure obligation.

What is the difference between paragraph 22(a) and 22(b)?

Paragraph 22(a) is the output disclosure: the entity’s interpretation of its resilience as at the reporting date, including implications for strategy, significant areas of uncertainty, financial flexibility, asset redeployment ability, and the effect of climate-related investments. Paragraph 22(b) is the input methodology disclosure: which scenarios the entity used, what assumptions, what time horizons, what scope of operations. The binding sentence is BC59: an entity is not required to disclose the results of its scenario analysis but is required to disclose its interpretation of those results. The methodology supports the interpretation. The interpretation is the disclosure obligation.

Does IFRS S2 require a quantitative scenario analysis?

Not for every entity. Paragraph B17 is the bright line: 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. BC65 closes the lack-of-skills loophole: if the resources are available, the entity is treated as having the skills, because the skills are obtainable. Lower-exposure entities are explicitly permitted to use qualitative scenario narratives under B15 and BC63. The IFRS Foundation factsheet codifies B17 plus BC65 as a 2D matrix of exposure against skills, capabilities, and resources. Quantitative is mandatory only at the high-exposure plus high-resources corner.

How often must IFRS S2 scenario analysis be updated?

Asymmetrically. Paragraph B18 establishes that the entity may carry out scenario analysis in line with its strategic planning cycle, including a multi-year cycle of three to five years. In non-cycle reporting periods, the methodology disclosure under paragraph 22(b) may remain unchanged from the previous period. The resilience assessment under paragraph 22(a), however, is required to be carried out annually. BC68 confirms the same architecture. A reporter running a multi-year cycle should disclose the cycle period explicitly so a reader does not have to guess whether the methodology is intentionally carried forward or simply not refreshed.

Is alignment with the Paris Agreement mandatory under IFRS S2?

No, alignment-use is voluntary. Paragraph 22(b)(i)(4) requires disclosure of whether the entity used a scenario aligned with the latest international agreement on climate change, currently the Paris Agreement. BC67 explicitly considered and rejected a mandate to use such a scenario. The disclosure is required in either direction: yes, the entity used an aligned scenario (and which); or no, the entity did not (and the rationale for the chosen scenario set). Skipping the sub-element entirely is a known-and-named omission. Picking a non-aligned scenario set with explicit rationale is also defensible.