A physical climate risk disclosure under IFRS S2 centres on Paragraph 29(c), which asks how much of the business is vulnerable to climate hazards. B65 in Appendix B asks the entity to consider four other parts of IFRS S2 and its financial statements when it prepares that number.
- B65 in Appendix B of IFRS S2 lists five things to consider when you prepare the Paragraph 29(c) metric. Each one links the metric to another disclosure.
- Step 1, time horizons: consider the short, medium and long-term horizons you defined under Paragraph 10. Using the same bands for the metric keeps the two consistent.
- Step 2, concentration: consider where your risks are concentrated, as described under Paragraph 13 (for example by area, facility or type of asset).
- Step 3, current financial effects: consider what you disclosed under Paragraph 16(a)-(b) about effects in the reporting period.
- Step 4, industry-based metrics: consider whether the industry-based metrics in Paragraph 32 could meet the requirement in whole or in part.
- Step 5, connections to the financial statements: consider the links with your financial statements, including whether any carrying amounts you use are consistent with them, and explain the connections (IFRS S1 Paragraph 21(b)(ii)).
What B64 and B65 add to the Paragraph 29(c) metric
Paragraph 29 of IFRS S2 sets out the cross-industry metric categories an entity must disclose, including Paragraph 29(c) (the climate-related physical risk metric) on the “amount and percentage of assets or business activities vulnerable to climate-related physical risks.” The body paragraph runs to one sentence per category. The methodology rules for those disclosures live one appendix deeper, at B64 and B65 in the application guidance.
B64 is procedural. It states that an entity is required to disclose information relevant to the cross-industry metric categories in addition to greenhouse gas emissions information. B65 lists five things the entity shall consider when it prepares those disclosures. Each one links the cross-industry metrics to another part of the standard or to the financial statements.
The opening note to Appendix B confirms the authority:
“This appendix is an integral part of IFRS S2 and has the same authority as the other parts of the Standard.”
(IFRS S2, Appendix B, opening note)
Read on its own, Para 29 asks for an amount and a percentage for each cross-industry category. Read with B64-B65, it also asks how that figure connects to the rest of the report.
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The five sub-clauses unpacked
B65 reads, in operative form:
“In preparing disclosures to fulfil the requirements in paragraph 29(b)–(g), an entity shall:
(a) consider the time horizons over which the effects of climate-related risks and opportunities could reasonably be expected to occur, described in accordance with paragraph 10.
(b) consider where in the entity’s business model and value chain climate-related risks and opportunities are concentrated (for example, geographical areas, facilities or types of assets) (see paragraph 13).
(c) consider the information disclosed in accordance with paragraph 16(a)–(b) in relation to the effects of climate-related risks and opportunities on the entity’s financial position, financial performance and cash flows for the reporting period.
(d) consider whether industry-based metrics, as described in paragraph 32—including those defined in an applicable IFRS Sustainability Disclosure Standard or those that otherwise satisfy the requirements in IFRS S1—could be used to satisfy the requirements in whole or in part.
(e) consider the connections between the information disclosed to fulfil the requirements in paragraph 29(b)–(g) with the information disclosed in the related financial statements, in accordance with paragraph 21(b)(ii) of IFRS S1. These connections include consistency in the data and assumptions used—to the extent possible—and linkages between the amounts disclosed in accordance with paragraph 29(b)–(g) and the amounts recognised and disclosed in the financial statements. For example, an entity would consider whether the carrying amount of assets used is consistent with amounts included in the financial statements and would explain the connections between information in these disclosures and amounts in the financial statements.”
(IFRS S2, paragraph B65)
B65 says the entity “shall” consider each item, so the considering is required. B65 does not dictate the outcome. B65(e) goes one step further: data and assumptions should be consistent “to the extent possible”, and the entity would explain the connections with its financial statements.
B65(a): consider the time horizons defined under Para 10
Paragraph 10 (the climate-related-risks-and-opportunities identification paragraph) requires the entity to specify, for each climate-related risk and opportunity, the time horizons over which the effects could reasonably be expected to occur:
“over which time horizons—short, medium or long term—the effects of each climate-related risk and opportunity could reasonably be expected to occur.”
(IFRS S2, paragraph 10(c))
Para 10(d) requires the entity to explain how it defines short, medium and long term and how these definitions link to the planning horizons it uses for strategic decision-making.
B65(a) asks the entity to consider those horizons when it prepares the Para 29(b)-(g) metrics. If the strategy section uses 0 to 3, 3 to 10 and 10+ year bands, using the same bands for the Para 29(c) figure lets a reader compare the two. If you use different bands, say why. If the strategy section uses 2030, 2040 and 2050 reference years, the metric should use the same years. A Para 29(c) figure computed over 30 years, next to a strategy section that plans over 10 years, is hard for a reader to connect.
A clear Para 29(c) disclosure names the horizon bands, attaches the amount vulnerable to each band, and uses the bands disclosed under Para 10, or explains any difference.
B65(b): consider where risks are concentrated (Para 13)
Paragraph 13 (the business model and value chain paragraph) requires the entity to describe “the current and anticipated effects of climate-related risks and opportunities on the entity’s business model and value chain” and to disclose “where in the entity’s business model and value chain climate-related risks and opportunities are concentrated (for example, geographical areas, facilities and types of assets).”
B65(b) asks the entity to consider those concentrations when it prepares the metric. If Para 13 names coastal regions or a facility type (data centres, port infrastructure, refinery sites), a Para 29(c) figure that breaks down the same way lets a reader connect the two. A single group-level percentage next to a Para 13 disclosure that names several concentrations leaves that link unanswered.
Two practical points follow. They are recommendations, because B65(b) sets no unit. First, work at the level at which you describe concentration. If Para 13 names individual assets, that points to asset-level results. Second, present the breakdowns Para 13 describes, in the same units, so a user can compare the two disclosures.
B65(c): consider current financial effects (Para 16(a)-(b))
Paragraph 16(a) asks how climate-related risks and opportunities “have affected” the entity’s financial position, financial performance and cash flows for the reporting period. Paragraph 16(b) asks which of those risks carry “a significant risk of a material adjustment within the next annual reporting period to the carrying amounts of assets and liabilities reported in the related financial statements”. Paragraph 16 asks for quantitative and qualitative information. Paragraphs 19 and 20 let an entity omit quantitative information in set cases, and Paragraph 21 then requires it to explain why.
B65(c) asks the entity to consider those current-period disclosures when it prepares the metric. If the strategy section reports a flood-related impairment in the year, a reader should be able to see how the Para 29(c) figure relates to it. Anticipated effects (Paragraphs 15(b) and 16(c)-(d)) sit outside B65(c), though using the same horizons for both helps a reader.
A clear disclosure either shows how the amount-vulnerable figure relates to the Para 16(a)-(b) figures, or explains why they are not directly comparable (different scope, measurement basis or aggregation). IFRS S1 B42(a) asks entities to “explain connections between disclosures in a clear and concise manner”.
B65(d): consider industry-based metrics (Para 32)
B65(d) asks the entity to consider whether industry-based metrics, as described in Paragraph 32, could meet the Para 29(b)-(g) requirements in whole or in part. Paragraph 32 points to the Industry-based Guidance (IBG).
The entity must consider IBG metrics and does not have to adopt them. If it applies the IBG, IFRS S1 paragraph 59 asks it to say so and name the industry. IFRS S2 does not require an explanation when an IBG metric is not used, though a short note helps users.
Eight industries carry an IBG climate topic coded 450a. Five of them carry numerical metrics: Real Estate, Mortgage Finance, Insurance, Water Utilities, and Hotels & Lodging. Health Care Delivery, Managed Care and Forestry Management ask for a description or discussion. Home Builders has a similar flood-zone metric under a different code (IF-HB-420a.1). Our guide to the IFRS S2 industry metrics walks through each one.
In Australia, AASB S2 does not require industry-based disclosures for now. The AASB deleted B65(d) and modified or omitted the related paragraphs as an interim measure, and it intends to finalise mandatory industry-based requirements by 2030. B65(a), (b), (c) and (e) still apply. Our comparison of AASB S2 and IFRS S2 covers the Australian changes.
B65(e): consider the connections with the financial statements
B65(e) cross-references IFRS S1 paragraph 21(b)(ii), which requires the entity to enable users to understand “the connections between disclosures provided by the entity … across its sustainability-related financial disclosures [climate-related, for an IFRS S2 reporter] and other general purpose financial reports published by the entity”, such as its related financial statements.
The B65(e) text gives a worked example: the entity “would consider whether the carrying amount of assets used is consistent with amounts included in the financial statements and would explain the connections between information in these disclosures and amounts in the financial statements.” The standard does not prescribe carrying amount as the measure for the Para 29(c) amount vulnerable. If the entity uses carrying amounts, B65(e) asks it to consider whether they are consistent with the financial statements and to explain the connections.
IFRS S1 paragraph 23 says the data and assumptions used in sustainability disclosures shall be consistent with those used in the financial statements “to the extent possible considering the requirements of IFRS Accounting Standards or other applicable GAAP”. B65(e) applies the same consistency to the Para 29(b)-(g) metrics and adds links between amounts. Where data or assumptions differ significantly, IFRS S1 B42(c) asks the entity to disclose information about the differences.
IFRS S2 has no assurance requirements. Each jurisdiction sets its own. In Australia, ASSA 5010 phases assurance in. In the first year of reporting, “other climate-related metrics and targets” are not reviewed. For Group 1 entities whose years start between 1 January and 30 June, the first-year rules apply for two years. One review of first-wave Australian reports found all assurance opinions unmodified. Under the minimum scope, those opinions did not cover these metrics. In September 2026, Australia’s regulator ASIC said reporters “should reconcile the assets and capital expenditure in the sustainability report with related parts of the financial report”.
How B65 links the metric to the rest of the report
B65’s five items link the metric to these parts of the standard:
| Methodology step | Paragraph it links to | What to consider | What a reader can check |
|---|---|---|---|
| Step 1 (B65(a)) Time horizons |
Paragraph 10 | The short, medium and long-term horizons defined under Paragraph 10. | Bands match across the strategy section and the metric, or the difference is explained. |
| Step 2 (B65(b)) Concentration |
Paragraph 13 | Where risks are concentrated, as described under Paragraph 13. | The breakdown can be read against the Paragraph 13 concentrations. |
| Step 3 (B65(c)) Financial effects |
Paragraph 16(a)-(b) | The reporting-period effects disclosed under Paragraph 16(a)-(b). | How the figures relate, or why they are not directly comparable. |
| Step 4 (B65(d)) Industry-based metrics |
Paragraph 32 | Whether Paragraph 32 industry-based metrics could meet the requirement in whole or in part. | Industry metrics considered. If applied, the industry is named (IFRS S1 paragraph 59). |
| Step 5 (B65(e)) Connections to the financial statements |
IFRS S1 Paragraph 21(b)(ii) | Whether carrying amounts used are consistent with the financial statements, with the connections explained. Data and assumptions consistent where possible. | Carrying amounts, if used, considered against the financial statements, and connections explained. |
Each link is a required consideration. Together they tie the Para 29(b)-(g) metrics to the strategy disclosures, the industry-based metrics and the financial statements.
The risk is a figure that stands alone: a Para 29(c) percentage with no stated link to its Para 10 horizon bands, the geographies its Para 13 disclosure names, or its Para 16(a)-(b) financial effects, and no stated connection to the financial statements (IFRS S1 paragraph 21(b)(ii)). B65 requires the entity to consider each link. A metric prepared without that consideration does not meet B65. A metric that was considered and still differs needs the connections explained.
The practical check for anyone reviewing a Para 29(c) disclosure, including an assurance provider, is whether each of the five considerations was done, and whether data and assumptions are consistent where possible. If any answer is “we have not yet considered that connection”, the disclosure does not meet B65, regardless of how the “vulnerable” threshold was defined or which scenario was used.
Worked Samples
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Full sample disclosures walked paragraph by paragraph across banking, real estate, mining, and insurance.
What reviews of early reports found
Reviews of early reports point to three patterns. Most of these reviews cover Australia’s first wave of mandatory reports under AASB S2, which is based on IFRS S2. One covers New Zealand’s climate standards.
Pattern 1: vulnerability figures were often missing or thin. A review of 25 Australian reports found reporting on vulnerable assets or business activities “limited across the sample”. A New Zealand review found “a notable lack of disclosure” of this metric. Australia’s regulator, ASIC, reviewed 40 reports and found that in some cases this information was “not being disclosed at all”.
Pattern 2: methods varied. One review found “notable diversity in practice” in which assets were counted as vulnerable. ASIC found “significant differences” in how entities disclosed these metrics, which makes them hard to compare. Another review said a clearer definition of “vulnerability” and of the method behind the numbers would help readers.
Pattern 3: the link to the financial statements is still developing. ASIC asked reporters to consider B65, “particularly” B65(e), and to reconcile assets and capital expenditure with the financial report. Another review expects the connection between sustainability disclosures and the financial statements to improve. The reviews do not report how often reports cite B65.
Limits to name in your methodology note
Asset-level risk data and asset-level carrying amounts make B65(b) and B65(e) easier to address. Three points belong in the methodology note.
First, check the elevation data behind flood results. Global flood hazard maps rely on global elevation data, which can misread ground height in dense urban areas and understate flood exposure at coastal city sites. Name the flood dataset, and check urban coastal sites against local flood maps or a bare-earth terrain model where you can.
Second, single-model projections show a narrower range. A figure built on one climate model shows a narrower range than a multi-model set. If you use one model, name it, and either justify the choice or flag the extra uncertainty.
Third, damage estimates may not cover every hazard. HAZUS and JRC depth-damage functions cover flood. If your damage estimates cover only some hazards, name the hazards left out so readers know the combined figure excludes them.
IFRS S1 paragraphs 77 and 78 ask entities to identify amounts with high measurement uncertainty and disclose the sources, assumptions and judgements behind them. ASIC asks for “clear, effective and proximate disclosure of relevant judgements, assumptions and areas of measurement uncertainty” for these metrics.
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First-year guide
Our IFRS S2 readiness guide lists the records to keep for each part of the physical-risk metric.
Sources
- IFRS S2 Climate-related Disclosures, paragraphs 10, 13, 15, 16(a)-(b), 19-21, 22, 29(b)-(g), 32, Appendix B paragraphs B64-B65, and Basis for Conclusions BC77 and BC137. IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, paragraphs 21(b)(ii), 23, 59, 77-78 and B42.
- IFRS S2 Appendix B opening note on authority of the appendix.
- Our guide to Paragraph 29(c).
- Our guide to Paragraph 22 scenario analysis.
- Our guide to the IFRS S2 industry metrics.
- Our review Six first-wave IFRS S2 disclosures: what they skipped.
- Our comparison of AASB S2 and IFRS S2, for Australian reporters.
- KPMG Australia, AASB S2 First Impressions: Early findings from the first wave of AASB S2 sustainability reporters in Australia (FAST30), March 2026, and the 30 June 2026 reporters edition.
- Deloitte Australia, Early insights into Wave 1 of Australian climate reporting, 23 March 2026.
- PwC Australia, AASB S2 unpacked: how did Australia’s Group 1 climate reporting fare?, 10 March 2026.
- SLR Consulting, What companies can learn from the first statements under New Zealand’s mandatory Climate-Related Disclosures framework, 31 July 2024.
- ASIC, Report 839: ASIC’s review of sustainability reports lodged for 31 December 2025, September 2026.
- AASB, AASB S2 Climate-related Disclosures, Basis for Conclusions BC28 and BC30.
- Assurance: AUASB, ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports under the Corporations Act 2001 (compiled December 2025).
- Illustrative disclosures: EY, Illustrative Climate-related disclosure of Quality Holdings Resources Limited (February 2025), which lists AASB S2 29(c) among the requirements it does not illustrate (p.58).
Frequently asked questions
What does a defensible physical climate risk disclosure require under IFRS S2?
Paragraph 29(c) of IFRS S2 asks for the amount and percentage of assets or business activities vulnerable to climate-related physical risks. Paragraph 31 sends the preparer to B64-B65 in Appendix B. B65 lists five things to consider: the Paragraph 10 time horizons, the Paragraph 13 concentrations, the current financial effects under Paragraph 16(a)-(b), whether Paragraph 32 industry-based metrics could meet the requirement in whole or in part, and the connections with the financial statements (IFRS S1 Paragraph 21(b)(ii)). The entity must consider all five.
How do the 5 methodology steps connect to Paragraph 29(c)?
B65 links the Paragraph 29(c) metric to the rest of the disclosure. Each item is something the entity shall consider when it prepares the metric. Step 1 brings in the time horizons from Paragraph 10. Step 2 brings in the concentrations described under Paragraph 13. Step 3 links the metric to current financial effects under Paragraph 16(a)-(b). Step 4 asks whether Paragraph 32 industry-based metrics could meet the requirement. Step 5 asks the entity to consider consistency with the financial statements and explain the connections. A percentage with none of these links is hard for a reader to use.
What does location data have to look like for a Paragraph 29(c) disclosure?
B65(b) asks the entity to consider where risks are concentrated, as described under Paragraph 13. If that disclosure names coastal regions, a facility type or asset categories, a Paragraph 29(c) figure that breaks down the same way lets a reader connect the two. A single group-level percentage cannot show that link. Where Paragraph 13 names individual assets, asset-level results are the natural basis. Early reviews found vulnerability figures were often missing or built in different ways.
How does a physical climate risk disclosure connect to the financial statements?
B65(e) asks the entity to consider the connections between the Paragraph 29(b)-(g) metrics and its financial statements, under IFRS S1 Paragraph 21(b)(ii). For example, if the Paragraph 29(c) figure uses carrying amounts, the entity would consider whether they are consistent with the financial statements and explain the connections. IFRS S1 Paragraph 23 asks for consistent data and assumptions to the extent possible. In September 2026, Australia’s regulator ASIC asked reporters to reconcile assets and capital expenditure in the sustainability report with the financial report.
