The Impact of Climate Risks on Enterprise Value under the new IFRS Sustainability Framework

The paper explores the imperative for global entities to disclose climate-related risks and opportunities, as mandated by the new IFRS sustainability disclosure standards S1 and S2. The paper investigates the multifaceted impact of climate-related risks. Emphasizing the importance of addressing both risks and opportunities, the paper navigates the implications for enterprise valuation. By integrating science-based scenario data and stress tests, the research aims to fill a critical gap in existing climate risk models that primarily focus on macroeconomic factors. Using a fictitious real estate company as an illustrative case study, the paper proposes a robust framework for integrating climate risk into financial forecasting and enterprise valuation. The findings contribute valuable insights for stakeholders, ranging from banks and asset managers to entities, emphasizing the increasingly essential role to consider climate-related risks in financial decision-making.