Climate scenario analysis: quantifying risk for AASB S2 and investor disclosure
Lever Impact delivers climate scenario analysis for Australian companies — quantifying physical and transition risks under AASB S2 and TCFD requirements with financial modelling and capital impact assessment.
Climate scenario analysis assesses how different climate futures — from a 1.5°C world to a 3°C+ world — affect an organisation's financial position, strategy, and capital. Under AASB S2, Australian in-scope entities must conduct and disclose climate scenario analysis covering both physical risks (floods, heat, water stress) and transition risks (carbon pricing, policy change, stranded assets). Lever Impact, as chartered accountants and corporate finance advisers, translates scenario outputs into quantified financial impacts, funding implications, and board-ready disclosures.
What AASB S2 requires from climate analysis
AASB S2 mandates that entities assess the resilience of their strategy and business model under at least two climate scenarios — including a scenario consistent with global efforts to limit warming to 1.5°C or 2°C. The analysis must cover both physical and transition risk categories and must connect scenario outcomes to quantified financial impacts on revenue, costs, assets, and capital. Scenario analysis results must be disclosed in the Sustainability Report and are subject to the three-year modified liability period. However, the underlying methodology and assumptions must be documented and defensible from Year 1.
Physical risk
Physical risks arise from the direct physical impacts of climate change: acute risks (extreme weather events, floods, wildfires) and chronic risks (sea level rise, heat stress, water scarcity). We model how these affect your asset base, operations, supply chain, and revenue across different warming trajectories.
Transition risk
Transition risks arise from the shift to a low-carbon economy: policy risks (carbon pricing, fuel efficiency standards), technology risks (renewable disruption, stranded assets), and market risks (changing customer preferences, ESG-driven capital repricing). We quantify transition exposure for your specific sector, asset profile, and geographic footprint.
Lever Impact's scenario analysis process
- Scenario selection — aligned with IPCC, IEA, and NGFS published pathways
- Time horizon definition — short (0–3 years), medium (3–10 years), long (10–30 years) per AASB S2
- Financial impact quantification — revenue sensitivity, cost exposure, asset impairment, capex requirements
- Capital and funding implications — how scenario outcomes affect your cost of capital and lender expectations
- Transition plan linkage — connecting scenario outputs to actionable decarbonisation pathways
- Board-ready disclosure — scenario outputs structured for AASB S2 and investor communication
- Physical and transition risk assessment
- Scenario selection and calibration
- Financial impact modelling
- Strategic resilience testing
- TCFD and ISSB-aligned disclosure
- Board and management engagement facilitation
Lever Impact Pty Ltd
Lever Impact Pty Ltd provides professional services including chartered accounting, corporate advisory, ESG transformation and sustainability advisory. Lever Impact Pty Ltd does not provide financial product advice or financial services.