Information on the current financial effects of material risks and opportunities must be disclosed from the start of reporting. This is nothing new, as similar provisions were already in the “old” ESRS. It is worth remembering that in addition to the financial effects of material risks and opportunities that occurred in the reporting period (ESRS 2 para 25), you also have to disclose information on those material risks and opportunities for which there is a significant risk of a material adjustment to the carrying amounts of assets and liabilities in the following year (ESRS 2 para 26).
For the anticipated financial effects of risks and opportunities, on the other hand, we have transitional provisions. In principle, they allow us to postpone reporting most of this information, with one exception that I will discuss at the end.
For material risks and opportunities related to all topics other than climate change, the rules are simple:
- Qualitative information is reported starting from the report for 2028. For a company that becomes subject to reporting obligations in the future, the exemption covers its first two years of reporting.
- Quantitative information is reported starting from the report for 2030. For a company that becomes subject to reporting obligations in the future, the exemption covers its first four years of reporting.
In other words, for 2026 (if a company already chooses to report under the simplified ESRS) and for 2027, no information on the anticipated financial effects of risks and opportunities needs to be disclosed. For the following two years, only qualitative (narrative) information will be required, and only after that everything the standards require.
For climate change the situation is somewhat different, mainly because the provisions of disclosure requirement E1-11 are structured differently. In standard E1, para 39 covers the anticipated financial effects of physical risks, para 42 transition risks, and para 42 opportunities.
Most of the information, both qualitative and quantitative, on the anticipated financial effects of climate-related risks and opportunities is subject to exactly the same transitional provisions described above as the reporting of anticipated financial effects of material risks and opportunities related to other topics. We will report qualitative information only from 2028 and quantitative information from 2030 (or, for other companies, we similarly have a two- or four-year transitional period).
The exception concerns four types of information for which there is no transitional period, meaning they must be reported from the start, once we begin applying the simplified ESRS:
- the carrying amount of assets at material physical risk before taking adaptation actions into account,
- the percentage of assets at material physical risk that are addressed by adaptation actions,
- the carrying amount of assets at material transition risk and the estimated range of stranded assets between the reporting period and the medium- and long-term time horizons,
- the percentage of assets at material transition risk that are addressed by transition actions.
That’s it. In this and the previous newsletter I tried to cover the full set of provisions on the financial effects of risks and opportunities, and I hope I have presented these requirements, scattered across three ESRS, as clearly as possible. Of course, when applying them, you always need to study the application requirements as well as the disclosure requirements.
Contrary to what you may expect, reporting financial effects is not that scary. Calculating anticipated financial effects will certainly be a challenge, but for most of them we still have a long transitional period. We can also expect EFRAG to issue implementation guidance in the meantime to help us perform the relevant calculations 😊
P.S. In just a week and a half, on 23 October 2026, I am running an online training on the simplified ESRS. Details and registration are on the MATERIALITY ACADEMY website. Two hours of pure substance!
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