How Companies Can Analyze Their Climate Risks and Assess Their Resilience

New Momentum in Regulation

The debate over the disclosure of climate-related risks continues to evolve: After the European Commission rejected the latest proposed amendments to the European Sustainability Reporting Standards (ESRS) in October 2025, the draft is now entering another one-month review phase.

You can find the latest information on the proposed changes here:
Blog: Omnibus I package

Regardless of the final wording of the European guidelines, one thing is certain: The disclosure of climate risks will be a central component of sustainability reporting in the future.
The European standards and international frameworks are based on the methodology of the Task Force on Climate-related Financial Disclosures (TCFD). It is recognized worldwide as the reference framework for identifying, assessing, and reporting climate-related opportunities and risks.

For companies, this means that those who understand and apply the TCFD methodology can identify climate risks early on, meet regulatory requirements, and make strategic decisions based on a robust data foundation. This blog post shows how to do this in practice—step by step, from scenario analysis to resilience assessment.

The TCFD as the Foundation of Climate Risk Analysis

The TCFD was launched in 2017 by the Financial Stability Board to provide companies and investors with uniform guidelines for assessing climate-related risks. Its goal: financial stability through transparency regarding climate risks.

This framework enables companies to systematically identify physical and transitional risks and conduct scenario analyses—the methodological core of any climate risk analysis.

Step 1 of the TCFD Methodology: Scenario Analysis

The scenario analysis assesses physical and transitional risks:

• Physical risks result directly from the consequences of climate change—both acute (e.g., extreme weather events) and chronic (e.g., long-term changes in temperature and precipitation).
• Transitional risks arise from the transition to a climate-neutral economy—for example, through regulatory changes, technological developments, market shifts, or reputational risks.

Scenario analysis is used to simulate various future scenarios, such as limiting global warming to below 2 °C (RCP 2.6) or a sharp rise in global average temperatures (RCP 8.5). This makes it possible to assess how likely certain risks are to occur and where the greatest potential for damage lies.

Step 2 of the TCFD Methodology: Resilience Assessment

A resilience assessment shows how resilient a company’s strategy or a location is to climate risks.

Factors considered include:

• The impact of potential risks on strategy, business model, and value chain
• Uncertainties in the resilience assessment, e.g., CO₂ prices, technological developments, probability of occurrence, intensity of extreme weather events, and data gaps in global supply chains
• The company’s adaptability through investments, innovations, and structural changes

The goal is to demonstrate how robust the business model remains under various climate scenarios and what (additional) measures are necessary to strengthen resilience.

The Business Benefits of Climate Risk Analysis

A structured climate risk analysis is far more than just a core component of individual regulatory requirements such as the CSRD or the EU Taxonomy. It is a strategic management tool that helps companies manage risks and capitalize on opportunities:

• Early identification of cost implications: Physical damage, adaptation costs, production losses, and regulatory levies can be better quantified
• Efficient use of resources: Investments are directed toward adaptation measures that deliver the greatest benefits
• Financial planning certainty: Risks can be factored into budgets and provisions, minimizing unexpected costs
• Trust advantage: Transparent reporting strengthens reputation and access to capital markets
• Supply chain resilience: Companies that actively manage climate risks build long-term resilience into their supply chains.

In short: It lays the foundation for identifying climate-related costs early on, actively managing their impacts, and securing sustainable competitive advantages.