Climate Analysis · UK SRS S2 Paragraph 22
Climate scenario analysis under UK SRS
UK SRS S2 paragraph 22 requires climate-related scenario analysis to support the resilience disclosure, carrying over the IFRS S2 scenario analysis requirements unchanged.
The approach must be commensurate with the entity’s circumstances — from qualitative narratives to quantitative modelling.
The requirement
What paragraph 22 requires
Climate scenario analysis under UK SRS is one of the more demanding requirements in UK SRS S2.
Paragraph 22 requires every entity applying the standard to disclose information that lets users of its general purpose financial reports understand the resilience of its strategy and business model to climate-related changes, developments and uncertainties.
It also requires the entity to use climate-related scenario analysis to assess that resilience.
This page sets out what the standard requires, how the FCA’s final Listing Rules apply it from 1 January 2027, which scenarios are commonly used, and where the standard accommodates entities with less mature analytical capability.
An entity shall disclose information that enables users of general purpose financial reports to understand:
- its assessment of its climate resilience as at the reporting date, including its capacity to adjust or adapt to climate-related changes (¶22(a)); and
- how and when it carried out its climate-related scenario analysis, including the scenarios used, the time horizons considered and the key assumptions made (¶22(b)).
Origin
IFRS S2 scenario analysis requirements, as carried into UK SRS S2
UK SRS S2 was published by the Department for Business and Trade on 25 February 2026, alongside UK SRS S1.
Both standards are currently available for voluntary use.
The FCA consulted on making UK SRS S2 mandatory for in-scope listed issuers; its final rules (PS26/19, 30 September 2026) instead require them to report against it on a comply-or-explain basis for accounting periods beginning on or after 1 January 2027.
The IFRS S2 scenario analysis requirements — paragraph 22 and application guidance paragraphs B1 to B18 of IFRS S2 (December 2025 text) — pass into UK SRS S2 with the same paragraph numbers and the same wording.
None of the UK amendments recorded in Annex A of the Government’s consultation response touches them.
The structure of the requirement matters: an entity does not freely choose its method.
The method is determined by the entity’s circumstances, and those circumstances must be reassessed each time the analysis is carried out.
Application guidance ¶¶B1–B18
| Paragraphs | What they cover |
|---|---|
| B2–B7 | How an entity assesses its circumstances |
| B8–B15 | How an entity determines an appropriate approach |
| B16–B18 | Additional factors over time |
Proportionality
The proportionality principle
The defining feature of UK SRS S2 scenario analysis is that the approach must be “commensurate with the entity’s circumstances”.
This is not a get-out clause; it is a calibration rule.
An entity must consider two factors when determining its approach:
- its exposure to climate-related risks and opportunities; and
- the skills, capabilities and resources available to it, both internal and external, to carry out the analysis.
The combination of these factors determines whether a simpler or more advanced approach is appropriate.
The IFRS Foundation factsheet published in March 2026, which applies equally to UK SRS S2 because the two standards are aligned, describes this as a matrix.
An entity with high exposure and high analytical capability is expected to apply a more advanced, quantitative approach.
An entity with low exposure or limited capability may use a simpler approach, such as qualitative scenario narratives.
Advanced quantitative
Required under ¶B17 to apply a more advanced quantitative approach.
Simpler first, then build
May start simpler but “would build its capabilities through experience” (¶B17).
Simpler approach
A simpler approach may be commensurate with circumstances.
Qualitative narratives
Scenario narratives can provide a reasonable and supportable basis (¶B15).
After the IFRS Foundation factsheet (March 2026), Figure 2 · UK SRS S2 ¶¶B15, B17
An entity with limited skills or resources may use a qualitative narrative — but it must still carry out the analysis, disclose what scenarios it considered, and explain what it concluded.
Capacity is not a reason to omit the disclosure.
Frequency
Two calibration mechanisms, one asymmetry
Under paragraph B15, qualitative information — including scenario narratives, alone or combined with quantitative data — can provide a reasonable and supportable basis for the resilience assessment.
Under paragraph B18, the entity is not required to refresh the underlying scenario analysis annually; it may align it with its strategic planning cycle, which the standard gives as “for example, every three to five years”.
However, the entity must assess its resilience annually to reflect updated insight, and must at a minimum update its scenario analysis in line with its strategic planning cycle.
This creates an update asymmetry.
The resilience output disclosed under paragraph 22(a) is refreshed every reporting period.
The scenario methodology disclosed under paragraph 22(b) may remain unchanged across several periods if no new scenario analysis was carried out.
| Disclosure | How often it is refreshed |
|---|---|
| ¶22(a) resilience assessment | Every reporting period |
| ¶22(b) scenario methodology | May stay unchanged across periods if no new analysis was carried out |
| Underlying scenario analysis | At a minimum in line with the strategic planning cycle — “for example, every three to five years” (¶B18) |
Scenario sets
Which scenarios
UK SRS S2 does not mandate a specific scenario or scenario provider.
Paragraphs B12 and B13 require a “reasonable and supportable” basis for the scenarios selected, with inputs relevant to the entity’s activities and their geographical location, and B12 suggests scenarios “that are publicly and freely available from authoritative sources”.
Three scenario families dominate UK practice
NGFS scenarios
The Network for Greening the Financial System publishes reference scenarios designed for financial sector use.
The current long-term set is version 5, published in November 2024, in four families: Orderly, Disorderly, Hot house world, and Too little, too late.
The NGFS also published an updated Guide on Climate Scenario Analysis on 13 November 2025, whose main addition is short-term scenarios for near-term risk assessment.
They are the de facto reference for UK financial services firms and are routinely cited in Bank of England supervisory exercises.
IEA Net Zero Emissions by 2050
The IEA’s NZE Scenario, updated in November 2025 as part of World Energy Outlook 2025, translates the Paris Agreement’s 1.5°C goal into a global pathway for the energy sector.
In the 2025 update, warming exceeds 1.5°C around 2030 and peaks at around 1.65°C about 2050, before falling back below 1.5°C by 2100.
A company using it as its 1.5°C-aligned pathway should reflect that change rather than the original 2021 framing, and name the edition used.
IPCC scenarios
The IPCC’s Shared Socio-economic Pathways — SSP1-1.9, SSP1-2.6, SSP2-4.5, SSP3-7.0, SSP5-8.5 — are widely used for physical climate risk modelling.
They underpin the climate science in the NGFS scenarios.
Because the NGFS re-issues its scenarios periodically, a disclosure that relies on them should name the version used.
UK SRS S2 does not mandate a minimum number of scenarios or a required temperature pathway.
What it requires is disclosure of which scenarios were used, including whether one consistent with the latest international agreement on climate change was among them — not that one must be.
Many entities combine one scenario consistent with the latest international agreement on climate change — typically a 1.5°C or well-below-2°C pathway — with at least one higher-physical-risk scenario.
FCA rules
What the FCA proposed in CP26/5, and decided
The FCA published Consultation Paper CP26/5 on 30 January 2026.
The consultation closed on 20 March 2026; it proposed that in-scope listed companies — commercial companies (UKLR 6), non-equity shares and non-voting equity shares (UKLR 16), and the transition category (UKLR 22) — report against UK SRS S2 on a mandatory basis, with an exception for Scope 3 emissions.
The FCA’s final rules (PS26/19, 30 September 2026) went a different way: listed companies in UKLR 6, 14, 15, 16 and 22 report against UK SRS on a comply-or-explain basis across all categories of disclosure, for accounting periods starting on or after 1 January 2027.
The scenario analysis requirements in paragraph 22 therefore apply to them as a disclosure to make, or to explain.
Scope 3 carries a one-year relief under the final rules; see Scope 3 under UK SRS.
CP26/5 did not propose to amend or soften the scenario analysis requirements themselves, and the Standard’s proportionality mechanism is preserved.
The Quoted Companies Alliance’s response to CP26/5 (paragraph 1.7) asked the FCA to clarify that smaller issuers are not expected to undertake externally validated or quantitatively modelled scenario analysis, and that qualitative assessments of climate resilience will be sufficient.
Whatever the answer on that framing, the final rules’ comply-or-explain basis means an issuer that does not meet paragraph 22 in full explains why.
Where the listed-company obligation comes from
- 30 Jan 2026CP26/5 published
Proposed mandatory UK SRS S2 for UKLR 6, 16 and 22 issuers.
- 20 Mar 2026Consultation closed
- 30 Sep 2026Final rules — PS26/19
Comply or explain across the UK SRS, for UKLR 6, 14, 15, 16 and 22.
- 1 Jan 2027Rules apply
Accounting periods starting on or after this date.
Depth
Quantitative versus qualitative
The standard does not require quantification.
It permits it, expects it where capability and exposure warrant it, and pushes entities toward more quantitative approaches over time.
| Level of depth | What it involves | Commonly appropriate for |
|---|---|---|
| Qualitative scenario narratives | How strategy and business model would respond to scenario conditions, referenced to external scenario sources but without parametric modelling of financial impacts. | Smaller entities with limited climate exposure |
| Hybrid analysis | Narratives supplemented by directional or order-of-magnitude quantification of selected impacts — for example, fixed-asset exposure to physical risk by location, or the estimated cost of carbon under a transition scenario. | Entities building capability |
| Quantitative modelling | Full financial modelling of scenario outcomes through revenue, cost, capital expenditure and balance sheet line items, with explicit assumptions about climate policy, energy prices, demand patterns and physical risk. | Larger financial institutions and high-exposure industrials |
Paragraph B17 states that an entity with high exposure and access to the necessary skills, capabilities or resources “is required to apply a more advanced quantitative approach to climate-related scenario analysis”.
The same paragraph says an entity with high exposure but without those skills might initially use a simpler approach, but “would build its capabilities through experience” and apply a more advanced quantitative approach over time.
Paragraph B16 adds that the approach need not be the same from one reporting period or strategic planning cycle to the next.
The FCA’s cost-benefit analysis in CP26/5 assumes issuers will adapt their existing TCFD processes to UK SRS’s more quantitative metrics and improve their reporting over time.
Nothing in the consultation or the final rules’ comply-or-explain basis requires uniform quantification of scenario analysis at the point of first application.
The output
What the resilience disclosure must contain
Paragraph 22(a) requires the entity to disclose its assessment of climate resilience itself.
This is not a summary of the scenario analysis methodology; it is a statement about the entity’s strategy and business model.
Where the entity has published a climate-related transition plan, paragraph 22 is interconnected with the transition plan disclosures and with the FCA’s final rules, which require disclosure of whether the company has a climate-related transition plan and, if so, where it can be found.
See transition plans under UK SRS.
For entities operating across several jurisdictions, the analytical choices must be transparent enough that a user can judge whether the inputs are reasonable in light of the entity’s circumstances.
| Paragraph | Discloses |
|---|---|
| ¶22(a) | The assessment of climate resilience itself: implications for strategy and business model, including existing assets, planned investments, financing requirements and access to capital; how and when the entity expects to respond, including planned transition activity. |
| ¶22(b) | The analysis: scenarios used, time horizons, scope of operations covered, and key assumptions — climate policy, macroeconomic trends, national or regional variables, energy usage and technology. |
Wider framework
How this fits with the wider framework
UK SRS S2 sits within a broader UK regulatory framework.
The Government has confirmed that UK SRS S2 is a national reporting framework for the purposes of section 414CB(6) of the Companies Act 2006.
A company reporting in accordance with UK SRS S2 therefore does not need to duplicate its disclosures to meet the climate-related financial disclosure obligations in section 414CB(2A).
The Government has also said it will consider the future of the section 414CB(2A) obligations when it considers the merits of reporting requirements against UK SRS.
For listed companies, the existing TCFD-aligned Listing Rule disclosures remain the rule until the FCA’s final rules apply, from accounting periods beginning on or after 1 January 2027.
Existing TCFD scenario work — much of it built on the TCFD’s 2017 Technical Supplement on scenario analysis — should transfer substantially.
The two principal upgrades are greater quantification of financial impacts, and tighter linkage between scenario outputs and the ¶22(a) resilience disclosure; see TCFD vs UK SRS.
The FRC adds two conditions:
- use of UK SRS S2 must be clearly referenced in the Non-Financial and Sustainability Information Statement; and
- the existing requirements of section 414CB(1)–(5) must still be met.
This applies whether UK SRS S2 is applied under the FCA’s comply-or-explain rules or voluntarily.
FRC sustainability reporting FAQ, updated 26 February 2026
Next steps
What to do this year
Companies in scope of the FCA’s final rules should treat 2026 as a transition year.
Map TCFD work to ¶22
Most TCFD-aligned scenario analysis will satisfy the ¶22(b) methodology disclosure with limited modification; the ¶22(a) resilience disclosure is more likely to need new work.
Anchor the scenario set
For most non-financial entities, one 1.5°C-aligned pathway (IEA NZE or NGFS Orderly) and one higher physical risk scenario (NGFS Hot house world or an SSP3/5 pathway) is the minimum credible set.
Place the entity on the matrix
The “commensurate with circumstances” calibration is a defensible judgement, but it must be a documented one.
Match the planning cycle
There is no requirement to repeat the full scenario analysis annually, but the resilience assessment must be refreshed each reporting period.
Engage the audit committee early
Scenario outputs feed the strategy resilience disclosure, which sits within the Strategic Report and carries the same governance as financial reporting.
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner. Secondary commentary is never the source for a number.
- Department for Business and TradeUK SRS S2 Climate-related Disclosures — final standard (PDF)
Published 25 February 2026. Paragraph 22 and application guidance ¶¶B1–B18.
- Department for Business and TradeUK Sustainability Reporting Standards: UK SRS S1 and UK SRS S2
The publication page for both standards, available for voluntary use.
- IFRS FoundationIFRS S2 Climate-related Disclosures — December 2025 text
The ISSB text whose ¶22 and ¶¶B1–B18 UK SRS S2 carries unchanged.
- Financial Conduct AuthorityCP26/5: Aligning listed issuers' sustainability disclosures with international standards
Published 30 January 2026, closed 20 March 2026 — the consultation PS26/19 finalises. It proposed mandatory UK SRS S2 for UKLR 6, 16 and 22 issuers.
- Financial Conduct AuthorityPS26/19: Aligning listed issuers' sustainability disclosures with international standards
First published 30 September 2026. The final rules: comply or explain across the UK SRS (¶1.2, ¶1.7) for UKLR 6, 14, 15, 16 and 22, from accounting periods starting on or after 1 January 2027.
- IFRS FoundationClimate resilience and scenario analysis factsheet (PDF)
March 2026 implementation factsheet setting out the proportionality matrix.
- Network for Greening the Financial SystemNGFS Scenarios Portal
Long-term scenarios, version 5, November 2024.
- Network for Greening the Financial SystemNGFS publishes updated Guide on Climate Scenario Analysis
Published 13 November 2025.
- International Energy AgencyNet Zero Emissions by 2050 Scenario — World Energy Outlook 2025
Updated NZE Scenario, November 2025.
- Intergovernmental Panel on Climate ChangeSixth Assessment Report, Working Group I
The physical science basis behind the SSP scenarios.
- Task Force on Climate-related Financial DisclosuresTechnical Supplement: The Use of Scenario Analysis (PDF)
June 2017 — the basis of most existing TCFD scenario work.
- Bank of EnglandClimate change
Supervisory climate scenario analysis and stress testing.
- Financial Reporting CouncilSustainability reporting developments — frequently asked questions
Updated 26 February 2026. The conditions on using UK SRS S2 as a national reporting framework.
- legislation.gov.ukCompanies Act 2006, section 414CB
Non-financial and sustainability information statement; subsection (6) national reporting frameworks.
Continue reading
Read next
UK SRS S2 — climate-related disclosures
The full S2 requirements that scenario analysis sits within.
Transition plans under UK SRS
What S2 asks you to disclose about a transition plan, if you have one.
Scope 3 under UK SRS
Value chain emissions, the one-year relief and comply-or-explain.
TCFD vs UK SRS
What changes for companies already reporting TCFD-aligned scenario analysis.