Climate risk and
CDP reporting

There are two main types of climate risk that organisations need to consider: physical risks and transition risks. Each type encompasses a variety of risks that can have a significant impact on operations, financial performance and overall resilience, including acute and chronic physical risks (e.g. extreme weather events, natural disasters, sea level rise and temperature increases), policy and legal risks, technology risks, market risks and reputational risks, to name a few.

To effectively manage and mitigate these risks, organisations should conduct a climate risk assessment and develop future scenarios to model potential impacts on operations, develop mitigation and adaptation strategies, and monitor regulatory changes and new technologies.

Mapping climate risks across your value chain is an important step in preparing for compliance with the Corporate Sustainability Reporting Directive (CSRD) for several reasons. First, it will help you comply with section E1 of the European Sustainability Reporting Standards (ESRS), which requires companies to identify and disclose material climate risks and opportunities through the double materiality assessment process. Second, the CSRD requires climate-related risks and opportunities to be assessed using scenario analysis, including both low-carbon transition scenarios (e.g. 1.5°C warming) and high physical impact scenarios (e.g. 4°C warming). Mapping risks across different scenarios helps to meet this requirement. Finally, the CSRD also requires information on mitigation and adaptation strategies, transition planning, and governance and risk management mechanisms. These should all be part of a climate risk assessment.

CDP is a questionnaire-based sustainability rating system that provides a reliable and trusted framework for companies to disclose their climate impacts. Companies must submit their environmental information through the CDP online portal. CDP operates on an annual disclosure cycle, with the questionnaire response window typically between June and September (as in 2024). In general, parent companies submit a consolidated response that includes all data relating to subsidiaries.

CDP has made a number of significant changes to its corporate disclosure framework and questionnaire, most notably the integration of its questionnaires for climate change, forests and water security into a single corporate questionnaire. It has also introduced a new, dedicated questionnaire for SMEs and aligned its questionnaire more closely with reporting standards such as International Financial Reporting Standards (IFRS) S2, the Task Force on Nature-related Financial Disclosures (TNFD), the European Sustainability Reporting Standards (ESRS) and the US Securities and Exchange Commission’s climate disclosure rule.