Chapter 01 · Climate & transitionClimate & Greenhouse Gas Emissions
Climate scenario analysis
Definition
Climate scenario analysis is a structured exercise that tests how different plausible climate-related futures could affect strategy, financial position, operations or resilience.
References
Australian mandatory climate reporting requires climate-related scenario analysis to assess resilience. The statutory minimum includes a low-warming scenario aligned with limiting warming to 1.5°C and a high-warming scenario in which warming well exceeds 2°C.
Corporations Act Ch 2M + AASB S2 — mandatory climate reportingCorporations Act 2001 (Cth), s 296D(2B); AASB S2, para 22 and Appendix B · verified 2026-08-23Official text
This reference provides supporting context for how “Climate scenario analysis” is defined and used.
Overview
What it means in practice
Climate scenario analysis should be read as a decision term, not simply as a label. Its practical meaning depends on the boundary being assessed, the accounting or governance purpose, and the evidence used to support the claim.
In practice, users should ask what is being measured or governed, who is relying on the term, and what would change if the term were applied differently. That discipline keeps climate scenario analysis from becoming a shorthand that hides assumptions.
Why it matters
Climate terminology often moves between strategy, finance, risk management and public claims. Climate scenario analysis matters because the same phrase can shape investment decisions, disclosure judgments and stakeholder expectations in different ways.
Common misconception
A common error is to treat climate scenario analysis as self-explanatory. The stronger approach is to state the scenario, timeframe, emissions boundary, asset class, sector or decision context that gives the term meaning.
Review questions
What boundary does the term cover? What evidence would prove or narrow the claim? Who could reasonably misunderstand the term if the context is not stated?
How it is used
The term appears in climate strategies, transition plans, emissions inventories, scenarios and investment decisions, where governments, companies, investors and technical teams use it to classify, assess or communicate a structured exercise that tests how different plausible climate-related futures could affect strategy, financial position, operations or resilience.
Its correct use depends on the relevant methodology, emissions boundary, baseline, timeframe and underlying data.