Insights

How to deal with “current financial effects”

ESRS requires companies to disclose two distinct types of financial effects for each material environmental topic: the current financial effectsalready reflected in the reporting period’s financial statements, and the anticipated financial effects expected in the short, medium and long term. The anticipated effects can be omitted for the first three reporting years, and most companies have done exactly that. But current financial effects cannot be deferred.

This page offers examples of companies that have disclosed current financial effects, as well as those that have disclosed no such effects.

Disclosing current financial effects

A small number of companies connect specific events or expenditures in the reporting period to their sustainability-related risks and opportunities, and cross-reference the financial statements.

In 2024, financial effects arose in connection with a risk identified in the S3 Affected Communities standard (see page 304). The risk describes the negative financial effects that may arise, for example, as a result of legal proceedings. For more information, see the Notes to the Consolidated Financial Statements on page 411.

BASF identifies a specific current-period financial effect, names the ESRS topic it relates to (S3), and directs the reader to the relevant note in the consolidated financial statements. The underlying event: in May 2024 BASF Corporation agreed to a €305 million class settlement with U.S. public water systems over alleged PFAS contamination from aqueous film-forming foam products. This is the kind of connectivity between the sustainability statement and the financial statements that the standards expect.

Spanish Temporary Energy Levy: Negative impact of €-450 million in 2024, included in special items, representing direct financial cost of climate/energy policy measures. [...] Brent averaged $81/bbl in 2024, 2% below 2023, contributing to 16% reduction in Upstream earnings (€1,490 million vs €1,779 million in 2023). [...] The production margin indicator came to 6.6 USD/bbl in 2024, while it was 11.1 USD/bbl a year earlier, contributing to 47% decline in Industrial segment earnings.

Repsol quantifies several climate-transition-related effects that hit the current period: a €450 million energy levy, declining margins from the energy transition, and specific segment earnings impacts. The disclosure connects climate policy directly to reported financial performance.

The more common approach: no current effects

Most companies that address current financial effects at all conclude that there are none, or that they are not material. This is a legitimate outcome, but the quality of the explanation varies. Some companies provide a clear rationale. Others offer a single sentence with no supporting analysis.

The current financial effects of the identified material risks and opportunities are limited.

The material risks identified in the DMA as per the CSRD methodology are already included in our risk management framework. These identified material risks are gross risks in accordance with the CSRD and related methodology established by EC, EFRAG and other guidance and do not take into account mitigation measures in place. The level of control over those risks is monitored by our risk management governance process. We therefore do not expect a material adjustment to the financial statements due to those material risks.

Regulatory restrictions mean that certain energy sources, such as biogas, can no longer be used for emission reduction measures. However, hedging activities ensured that financial effects for the BMW Group were completely avoided. No material risks or opportunities have been identified for which there is a significant probability of occurrence in 2025 that would result in a material adjustment to the carrying amounts of the assets and liabilities recognised in the corresponding financial statements.

These three responses illustrate the spectrum. Netcompany offers a single sentence with no supporting detail. Sanofi provides more context, explaining that its material risks are assessed on a gross basis (before mitigation) and that existing risk management controls are sufficient to prevent material financial statement adjustments. BMW explains the specific mechanism that prevented financial effects (hedging) and confirms no material adjustments to carrying amounts.

Disclosing expenditure on action plans

ESRS expects companies to disclose the significant expenditure and resources allocated to their sustainability action plans. The relevant disclosure requirements (E1-3, E2-3, E3-3 and so on through to G1-4) all ask for monetary amounts, but companies are also permitted to use ranges or describe resources qualitatively when precise figures are not available.

In practice, environmental action plans (especially E1-3 on climate) are more likely to include monetary expenditure than social action plans. Most S1-4 and S2-4 disclosures describe programmes and initiatives without any budget figures. The standards do not distinguish between environmental and social topics here: any “significant” expenditure should be disclosed.

What good looks like

The strongest disclosures break expenditure into CAPEX and OPEX, link it to specific actions, and indicate how much is already spent versus planned. Standards-setters may point to examples like these and expect others to meet the same quality over time.

Each of the actions has an associated budget (CAPEX or OPEX) that must be approved by the CEO of the corresponding factory. Based on the financial data, an estimate has been made to allocate CAPEX or OPEX to energy efficiency (€1,402,478 and €216,933 respectively) and to the other decarbonization levers (€635,600 and €27,910,939 respectively). The 2025–2030 Decarbonization Plan requires an estimated annual investment of €817,500 in CAPEX and €1,711,315 in OPEX. 95% of the CAPEX and 49% of the OPEX of the 2024 decarbonization initiatives is aligned with the Taxonomy.

Acerinox splits current and planned expenditure by CAPEX and OPEX, breaks it down by decarbonisation lever, and ties it to Taxonomy alignment percentages. This level of granularity makes it possible for a reader to assess whether the company is investing at a scale that matches its stated ambitions.

An internal carbon price of €100 has been implemented to consider carbon-intensity variations between suppliers in raw material pilot tenders. [...] OPEX increase for decarbonized sourcing considered in 2024 Strategic Plan to fund activities with suppliers. [...] We aim to define these targets by the end of the 2026 fiscal year.

Sanofi takes a different approach: their action plan table has a column for “Current and future allocated resources (CAPEX, OPEX)” but fills it primarily with team descriptions and governance structures rather than monetary figures. The only concrete number is the internal carbon price of €100 per tonne. This is an honest disclosure – the company acknowledges it does not yet have full budget figures – but it shows the gap between what the standards ask for and what many companies currently provide.

Ranges and large-scale plans

Companies are allowed to use ranges rather than exact figures. Some large companies disclose investment envelopes that run into the billions.

Planned investment of €16,000–19,000 million over 2024–2027, with above 35% focusing on low-carbon businesses.

Repsol uses a range (€16–19 billion) for its multi-year plan, then provides exact figures by business unit. This is a legitimate way to handle uncertainty while still giving the reader a sense of scale.

Social topics: the gap

Monetary expenditure disclosures are noticeably rarer for social topics. Most S1-4 (Own workforce) and S2-4 (Value chain workers) disclosures describe programmes qualitatively with no budget attached. A few companies stand out.

In 2024, Hydro spent NOK 300 million in its local communities including community investments, TerPaz (local community centres), donations and sponsorships. Hydro made a provision in December 2024 of NOK 300 million to support communities along the pipeline between the Paragominas mine and Alunorte refinery in Brazil.

Norsk Hydro is one of the few companies to put a specific figure on social expenditure. NOK 600 million across community investments and a pipeline-related provision gives a concrete picture of resources committed to affected communities.

The pattern is clear: environmental action plans, particularly for climate (E1-3), are more likely to include monetary figures. Social action plans lag behind. As CSRD reporting matures, standards-setters and auditors are likely to look to the stronger examples – Acerinox’s CAPEX/OPEX breakdowns, Repsol’s range-based approach – as benchmarks for what adequate disclosure looks like.

Drawing a conclusion on climate resilience

ESRS 2 SBM-3 and ESRS E1 require companies to describe the resilience of their strategy and business model to climate change. Scenario analysis is part of the input. The output that matters is a conclusion: is the strategy resilient, under what conditions, and where are the vulnerabilities? The quantitative financial effects of that analysis can be deferred under the ESRS 1 Appendix C phase-in, but the qualitative resilience conclusion cannot.

Across the reports reviewed, the quality of resilience conclusions varies widely. Some companies run detailed scenario analysis but never translate it into a conclusion. Others state “we are resilient” with no supporting evidence. A small number do both: they run the analysis and draw a conclusion that connects to their financial statements or to specific actions.

What good looks like

The strongest resilience conclusions are anchored to something concrete: the assumptions behind the financial statements, or the specific actions the company says will keep the strategy resilient.

At present, the BMW Group’s strategy is consistent with the transition to a carbon-neutral economy in accordance with ESRS E1 AR 12(d). [...] the low-emission scenario is incorporated into the assumptions for the Group Financial Statements.

BMW does two things well. It states the conclusion plainly (the strategy is consistent with a carbon-neutral economy), and it anchors that conclusion by noting that the low-emission scenario is used in the assumptions underlying the consolidated financial statements. The connectivity between the sustainability and financial statements is exactly what the standards expect. Three IPCC scenarios (SSP1-1.9, SSP2-4.5, SSP5-8.5) sit behind the analysis, but the reader gets the output first.

Nine physical hazards (extreme heat, river flooding, coastal flooding, tropical cyclones, wildfires, water stress, and others) were scored from 0 to 10 at site level across medium and long time horizons under IPCC SSP5-RCP 8.5 and SSP1-RCP 2.6.

Acerinox’s conclusion is granular by asset: the reader can see which specific sites face which hazards. Site-level findings make the conclusion actionable – mitigation can be directed at the sites that score highest on the hazards that matter most.

Analysis without a conclusion

A common failure pattern is running the analysis but not drawing a conclusion from it. The scenarios are named, the methodology is described, and then the reader is left to infer whether the strategy holds up.

Three IEA scenarios were used: STEPS (Stated Policies, 2.4°C), APS (Announced Pledges, 1.7°C) and NZE (Net Zero Emissions, 1.5°C). Lifecycle carbon intensity was checked against TPI (<2°C) and MSCI ITR (1.9°C).

TotalEnergies names its scenarios and benchmarks its carbon intensity, but E1-9 is marked “omitted” and SBM-3 does not draw a resilience conclusion. The inputs are there; the output is missing. Novartis shows the opposite problem – a quantified exposure table with USD amounts at 2025, 2030 and 2050 but no named scenario to anchor it.

Boilerplate resilience

At the weaker end, companies assert resilience without showing the work. No scenarios, no horizons, no specific findings – just a statement that the strategy is resilient.

Our three strategic sustainability priorities – decarbonisation, biodiversity, and community impact – play an enabling role in our strategy and project delivery. They support that we mitigate risks and deliver more resilient energy projects that also drive a positive change for society and nature.

Ørsted’s entire SBM-3 climate resilience content is the paragraph above plus a pointer to other pages. E1-9 is similarly brief: 134 characters directing the reader to the anticipated financial effects discussion. No scenarios are named in the structured disclosures, no horizons are specified, and no conclusion is drawn about where the strategy might be vulnerable.

During 2024, KONE’s strategy and business models showed resilience in harnessing the material opportunities and addressing material impacts and risks [...] The conclusion was supported by a qualitative assessment based on KONE reaching the set strategic targets and KPIs during the reporting period.

KONE’s resilience conclusion is that KONE hit its KPIs this year. This conflates operational performance with climate resilience: meeting strategic targets in 2024 says very little about whether the business model holds up under a 4°C warming scenario in 2050. E1-9 is then deferred under phase-in.

MAPFRE faces significant risks due to climate change, especially in relation to natural disasters that may increase in frequency and severity, impacting claims and the resources needed for their management. Furthermore, the increase in climate risk could potentially introduce material uncertainty in the assumptions and lead to an inaccurate assessment of insurance risk.

Mapfre’s entire E1-9 content is the paragraph above. For a property and casualty insurer whose core business is pricing climate risk, this is thin. No scenarios, no quantification of expected claims under different warming pathways, no conclusion about whether the underwriting book is resilient.

The honest admission

One company stands apart by stating plainly that the analysis has not been performed.

Qt has not conducted a separate resilience analysis on the company’s capacity to address its material impacts and risks or take advantage of its material opportunities.

QT Group’s disclosure is non-compliant with the resilience requirement, but it is transparent about that fact. A reader knows exactly what is missing and can ask about it. That is more useful than boilerplate that creates the appearance of analysis without the substance.

The pattern across the dataset: large, sophisticated companies are not always the strongest reporters. Some mid-caps (Hilti, KRONES, Frequentis) outperform much larger peers on resilience conclusions. The most common failure is producing inputs without an output – running scenario analysis and never stating what it means for the strategy. For a companion view of the scenarios themselves, see What climate scenario analysis looks like in practice.

What climate scenario analysis looks like in practice

ESRS expects companies with material climate impacts to run scenario analysis covering at least a well-below-2°C pathway and a pathway with significantly higher warming (typically above 3°C). Of the 87 reports reviewed, 70 (80%) name at least one reference scenario. This is a picture of what they are actually using.

The most common reference scenarios

The same handful of scenarios appear again and again. IPCC pathways dominate the physical-risk side; IEA pathways dominate the transition side. RCP labels (the earlier IPCC AR5 generation) and SSP labels (the current AR6 generation) often describe overlapping temperature pathways, so they are grouped below.

Counts combine companies naming either the SSP or the equivalent RCP label for the same temperature pathway.

The dominant pattern: IPCC physical plus IEA transition

The most common approach across the dataset is to pair an IPCC scenario (covering physical-risk projections) with an IEA scenario (covering transition-risk projections). Chemicals, industrials, healthcare and auto companies all tend to use some version of this combination.

Sanofi used scenario analysis to perform a physical and transition risk assessment based on three of the IPCC climate change scenarios (RCP2.6, RCP4.5, RCP8.5) under two different time horizons (2030 and 2050). For transition risks, Sanofi also used IEA transition scenarios (IEA Net Zero Emissions 2050 and IEA Sustainable Development Scenario).

Sanofi’s selection is the clearest example of the IPCC + IEA pairing. Three IPCC RCPs bracket the physical-risk side from well-below-2°C to more than 4°C, and two IEA pathways cover the transition side.

The identification and assessment of the transition events was based on the 1.5°C Net Zero Emissions by 2050 scenario of the International Energy Agency. Physical-risk projections for production sites were based on IPCC SSP5-8.5.

BASF uses a minimal but compliant version of the pattern: one IEA transition scenario (NZE 2050), one IPCC physical scenario (SSP5-8.5).

Three IPCC climate scenarios are used: a low-emissions scenario (<+1.5°C, SSP1-1.9), a medium scenario (+2.5°C, SSP2-4.5), and a high scenario (>+4°C, SSP5-8.5).

BMW takes the all-IPCC route, using three SSP-based scenarios with explicit temperature labels. No IEA scenario is named in BMW’s climate DRs, but the three-scenario pairing covers the required temperature range.

Less common choices worth looking at

A handful of companies have made unusual or interesting scenario choices that step outside the standard IPCC + IEA pairing. Each of these is worth considering as an input to a company’s own scenario design.

The analysis uses WBCSD’s 1.5°C Societal Transformation Scenario and its >3°C Historic Trends Scenario to test the business model against contrasting food-system futures.

Danone is the only company in the dataset to use the World Business Council for Sustainable Development’s food-system scenarios. For a food company, the WBCSD pathways translate more directly to agricultural and consumer-behaviour inputs than a generic IEA energy scenario would.

Two internal pathways were modelled: a “baseline” scenario (current production and emissions trajectory) and an “achievable sustainable” scenario (target production with 60% renewable electricity and full decarbonisation-lever adoption).

Acerinox pairs standard IPCC and IEA scenarios with two custom scenarios designed to stress-test its own decarbonisation plan. The custom pair is more operationally meaningful than any reference scenario alone, because it directly ties scenario inputs to the company’s levers.

Three SSP-RCP combinations are used: SSP1-RCP1.5 (1.5°C), SSP2-RCP2.7 (2.7°C), and SSP4-RCP4.0 (4°C).

Kone uniquely uses SSP4 (“inequality”) as its high-warming pathway, rather than the more common SSP5 (“fossil-fuelled development”). SSP4 captures a middle-of-the-road world with strong regional inequality, which Kone argues fits its supply-chain exposures better than SSP5 would.

The analysis uses the full IPCC RCP suite (RCP 2.6, 4.5, 6.0, 8.5), two NGFS scenarios (Net Zero 2050 and Delayed Transition), and CAT Current Policies.

Hilti has the most diverse scenario set in the dataset – four IPCC RCPs, two NGFS pathways, and the Climate Action Tracker Current Policies scenario. It is the only company to use CAT, and its NGFS usage is rare outside the financial sector.

The menu of reference scenarios is stable and well-known. The practical question is not which scenarios to name but how meaningfully they are applied to the business. For that, see Drawing a conclusion on climate resilience.