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Definition

Climate resilience

Climate resilience is your strategy and business model's capacity to keep working, fund a response and change course when physical hazards or the shift to a lower-carbon economy affect the company.

What is climate resilience?

Climate resilience is your company's capacity to absorb climate disruption and make workable choices. Test both physical hazards, such as floods and heat, and transition changes in policy, technology or demand. A useful conclusion states what the business can handle and where the response fails.

If you report under IFRS S2, paragraph 22 requires you to assess this capacity using climate scenario analysis. Paragraph 23 asks you to consider both general climate metrics and the metrics that apply to your industry.

Why does climate resilience matter to you?

An investor or reporting reviewer may ask what changed in your strategy, assets or investment plan. IFRS S2 paragraph 22(a) covers uncertainty, flexible financial resources, asset options and planned investment. Revised ESRS E1-3 paragraph 19 asks for results, uncertainty and capacity to adapt. The revised ESRS applies from financial year 2027, with an option for in-scope undertakings to use it for financial years beginning in 2026.

How does climate resilience work?

Take each material result from the scenario analysis and record the operational limit, chosen response, funding or asset capacity, management trigger and remaining exposure. The conclusion should say whether the response works across the tested time horizons, not merely list risks or planned actions.

What mistakes should you avoid?

  • Treating a risk register or continuity plan as proof that the strategy can adapt.
  • Claiming success without testing whether cash, assets, suppliers or staff are available when needed.
  • Hiding the point at which the response capacity fails.

Is climate resilience the same as climate change adaptation?

No. Adaptation is an action that reduces harm from physical climate effects. Resilience is the tested capacity of the strategy and business model after considering those actions, transition changes and their limits.

What should you provide when an investor asks?

Provide the approved resilience conclusion, scenario results, affected operations, response limits, available funding, asset choices, planned investments, decision triggers, key uncertainties and remaining exposure, all dated to the reporting period.

Example

Hypothetical Indonesia freight example: Suppose a freight forwarder reports at 31 December 2026 and tests its Surabaya cross-dock over a 2035 time horizon. Its internal Flood Test 2035, version 2, selects the SSP5-8.5 high-emissions scenario in the IPCC Sixth Assessment Report Working Group I Interactive Atlas.

The company treats a six-day road closure as an internal test assumption, not an IPCC prediction. It tests whether the cross-dock can keep serving customers if river flooding makes its access roads unusable for that period.

The cross-dock normally sorts 180 consignments a day. Two unaffected partner warehouses can each sort 65 a day, giving 2 x 65 = 130 consignments. The daily shortfall is 180 - 130 = 50 consignments, or 50 x 6 = 300 over the event.

Management tests reserving 50 consignments a day at a third partner warehouse. At an assumed IDR 120,000 per consignment, six days cost 50 x 6 x IDR 120,000 = IDR 36 million. An IDR 40 million emergency reserve leaves IDR 4 million of headroom. The trigger is a severe-flood warning plus an expected access closure longer than 24 hours. The resilience conclusion is conditional: the plan maintains volume for six days, but fails from day seven or if the third warehouse is unavailable.

Where it comes up

IFRS S2 climate resilience, response capacity, asset options and investmentIFRS S2 paragraph 22(a)(i)-(iii), paragraph 22(b) and paragraph 23Revised ESRS E1-3 climate-resilience results, uncertainty and capacity to adaptCommission Delegated Regulation C(2026) 5010, ESRS E1-3 paragraph 19 and AR 7-10Official source

Related terms

Climate scenario analysis

Climate scenario analysis tests how your strategy, business model and financial performance could change under several plausible climate futures, including physical hazards and policy, market and technology shifts.

Physical climate risk

Physical climate risk is the potential for acute events or chronic climate shifts to damage assets, interrupt operations, disrupt supply chains, and change revenue, costs, cash flows, financing, or insurance.

Climate-related transition risk

Climate-related transition risk is the financial risk that policy, legal, technology, market, or reputation changes create as economies move towards lower greenhouse gas emissions.

Climate change adaptation (EU Taxonomy objective 2 / ESRS E1)

Climate change adaptation changes operations, assets, or plans to reduce harm from current or expected physical climate conditions, while climate change mitigation addresses the emissions that drive warming.

Sources

Last verified 2026-08-21

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Climate resilience Definition | Keslio