ESRS E1-9 Financial Effects
ESRS E1-9 is the most financially demanding disclosure in ESRS E1 — requiring quantification of the anticipated financial effects of climate-related physical and transition risks and opportunities. This is where sustainability reporting meets financial analysis, and where most companies are most underprepared.
ESRS E1-9 is the most financially demanding disclosure in ESRS E1 — requiring quantification of the anticipated financial effects of climate-related physical and transition risks and opportunities. ESRS E1-9 requires disclosure of the anticipated financial effects of material climate-related risks and opportunities on the company's financial position, financial performance, and cash flows — across short, medium and long-term time horizons.
What ESRS E1-9 requires
ESRS E1-9 requires disclosure of the anticipated financial effects of material climate-related risks and opportunities on the company's financial position, financial performance, and cash flows — across short, medium and long-term time horizons.
For physical risks: potential asset impairment from floods, storms, or chronic temperature rise; increased operating costs from extreme heat or water stress; revenue loss from supply chain disruption; and increased insurance costs.
For transition risks: stranded asset exposure from carbon pricing; capital expenditure required for low-carbon technology transition; revenue impact from changing customer preferences; and cost of regulatory compliance.
For opportunities: revenue from low-carbon products and services; cost savings from energy efficiency; access to green finance at preferential rates; and competitive advantage from early transition.
Quantification is required — not just identification. Qualitative-only disclosure (high/medium/low) is insufficient for material risks and opportunities.
Quantification approaches
Three levels of quantification are typically used, escalating in precision and cost:
Level 1 — Qualitative ranges: High/medium/low financial impact with brief narrative. Minimum acceptable for immaterial risks. Not sufficient for material risks under ESRS E1-9.
Level 2 — Quantitative ranges: Financial impact expressed as a range — e.g. €5M–€20M potential revenue impact from carbon pricing by 2030 under the NGFS Net Zero 2050 scenario. This is the minimum expected level for material risks.
Level 3 — Full financial modelling: Integrated scenario models that run climate risk factors through a financial model to produce P&L, balance sheet, and cash flow impacts by scenario and time horizon. This is investor-grade disclosure and is increasingly expected for companies with highly material climate exposure.
For most Wave 2 companies, Level 2 quantification for material risks and Level 1 for less material risks is a credible starting point.
The Amended ESRS relief and what remains mandatory
The Amended ESRS (December 2025) provided some relief on E1-9 quantification — specifically reducing the granularity of financial effect disclosure required for Wave 2 companies.
What remains mandatory under Amended ESRS: disclosure of whether climate risks and opportunities have material financial effects; a description of those effects; and quantification where the effects are material and quantification is feasible.
The feasibility test is important — if you genuinely cannot quantify a financial effect with reasonable confidence, you can disclose this limitation and explain what information would be needed. This is not a blanket excuse to avoid quantification — assurers will test whether the claim of infeasibility is justified.
For companies that have already invested in climate scenario analysis tools (NGFS scenarios, physical risk providers), E1-9 quantification is a relatively modest additional step.
Frequently asked questions
Do we need to hire a climate economist for ESRS E1-9?
Not necessarily for initial compliance. Level 2 quantification can be done with internal finance and sustainability teams using NGFS scenarios and sector benchmark data. For companies with highly material climate exposure — fossil fuels, coastal real estate, water-intensive manufacturing — specialist support for Level 3 modelling is recommended.
How do we quantify physical climate risk without detailed asset data?
Start with a portfolio-level screening using commercial physical risk providers (Moody's, XDI, Jupiter). These tools produce financial impact ranges at asset location level using climate scenario data. Refine with site-specific analysis for your highest-risk locations.
Can we use the same scenarios for E1-9 as for our physical and transition risk assessment?
Yes — and you should. Consistency between your risk identification (E1-2, E1-3) and your financial quantification (E1-9) is required. Using different scenarios for different disclosures creates inconsistencies that assurers will flag.