SSBJ Climate Scenario Analysis: What "At Least One Scenario" Actually Requires You to Model

Ask a Japanese sustainability team what their SSBJ climate disclosure will say about scenario analysis, and most will describe a paragraph: climate change poses risks to the business, the company is monitoring the situation, resilience is being assessed. That paragraph will not satisfy the standard. SSBJ’s Climate Standard mirrors IFRS S2, and IFRS S2 does not ask for a paragraph. It asks for a number, produced at least twice, under conditions the company does not choose.

What paragraph 22 actually says

IFRS S2’s paragraph 22 requires an entity to use climate-related scenario analysis to assess its climate resilience, and to disclose whether that analysis included a scenario consistent with the latest international agreement on climate change — in practice, a pathway aligned with the Paris Agreement’s roughly 1.5°C goal (IFRS Foundation, webcast on climate resilience and scenario analysis requirements in IFRS S2). The standard doesn’t hand a company a finished scenario. It wants enough range to cover both transition risk and physical risk, and it wants the company to explain why it picked the scenarios it picked (RSM Global, “IFRS scenario analysis: a key tool for climate risk management”).

SSBJ inherits this structure and layers Japan-specific alternatives on top — it does not water it down. Three paragraphs on transition risk and three on physical risk, with no numbers attached, does not meet paragraph 22. What meets it is a number: run the scenario through the company’s own financial structure and show what changes — revenue down in one business line, cost up in another, a specific asset written down. Something the company can point to and defend.

Why the market converged on three

Neither IFRS S2 nor SSBJ names “1.5°C, 2°C, 3°C” as a fixed set. The standard specifies a shape: at least one scenario where transition succeeds and physical damage stays contained, and at least one where it doesn’t. Japanese preparers and their advisors have mostly converged on a three-point spread anyway — a below-1.5°C pathway, a middle pathway near 2°C, a current-policies pathway drifting toward 3°C — because it’s the smallest set that separates the two risk types the standard cares about. The 1.5°C end is a transition-risk test: carbon pricing rises fast enough to strand fossil-linked assets and push regulatory cost onto a company’s supply base within a normal planning horizon. The 3°C end is a different question entirely — the threat stops being regulatory and becomes physical: a factory or warehouse damaged, a supplier route cut, insurance that gets harder to price. The 2°C scenario in the middle is less its own risk story than a check that the model doesn’t jump between the two extremes without an explanation.

The scenarios most companies borrow, and what they assume

Very few companies build climate scenarios from scratch. Most start from a small set of public frameworks and adapt the assumptions to their own sector. The Network for Greening the Financial System, a coalition of central banks and supervisors known as NGFS, publishes the most widely reused set. NGFS groups its long-term scenarios into four families — Orderly, Disorderly, Hot House World, and Too Little Too Late — spanning seven named pathways from Net Zero 2050 down to Current Policies (Green Calculus, NGFS scenario summary; primary data at the NGFS Scenarios Portal). The gap between an orderly and a disorderly transition shows up directly in the price. NGFS modeling puts the shadow carbon price an orderly net-zero-by-2050 pathway needs at roughly US$300 per tonne of CO2 by 2035 — several times today’s carbon costs, and inside a single planning horizon, not at the far end of one. NGFS published a first set of short-term scenarios in 2025 for near-term planning, and has flagged a revised methodology for its main long-term scenarios due at the end of 2026. Record which vintage your analysis used — the numbers underneath it are going to move.

Why this ends up split between two teams

Most companies underbuild scenario analysis because no single department can finish it alone. A sustainability team can flag which physical and transition risks matter, but it can’t say on its own what a $300-per-tonne carbon price does to a specific product line’s margin, or what a supply-chain disruption under a 3°C pathway does to a specific facility’s insurance and continuity costs. Those are finance and operations questions, answered against finance and operations data, using assumptions the sustainability team hands over. The work is mapping a carbon-price assumption onto the company’s real cost base, and a physical-risk assumption onto its real facility list — that’s where the effort actually goes, and it’s not visible in the standard’s text. It has to show up in the disclosure instead.

Where this lands on the SSBJ clock

SSBJ’s mandatory disclosure begins with the fiscal year ending March 2027, for Tokyo Stock Exchange Prime-listed companies with average market capitalization of ¥3 trillion or more. That’s Tier 1 — roughly the largest cohort within the TSE Prime market’s approximately 1,500–1,600 listed companies. Tiers 2 (¥1–3 trillion) and 3 (¥500 billion–¥1 trillion) follow in FY2028 and FY2029 (Linklaters’ analysis of the FSA roadmap). Scenario analysis is part of the Climate Standard from a company’s first mandatory disclosure year — unlike third-party assurance, which the FSA has scheduled a fiscal year behind disclosure and initially scoped to governance, risk management, and Scope 1–2 emissions only. Scenario analysis gets no such grace period. A Tier 1 company’s first SSBJ filing, covering the year ending March 2027, has to include it.

What “audit-ready” means for this specific disclosure

Document the scenario choice and its rationale when you make the choice — which public framework, which vintage, why that spread fits your sector and geography — not reconstructed afterward to justify a result someone already had in mind. Keep a visible chain from source to number for every assumption that carries from the external scenario into the internal model: the carbon price path, the physical-risk trigger points, the demand-shift assumptions. That chain is what an assurance provider or a skeptical investor asks to see first. And record the vintage. NGFS’s own methodology revision at the end of 2026 will change the numbers a current 1.5°C scenario runs on, so a scenario analysis needs a refresh plan, not a one-time exercise treated as permanently valid.

Where Socious Report fits

Socious Report tracks that chain — the external scenario a company selects, the assumptions mapped onto its own cost and asset structure, and the disclosure paragraph that cites both — capturing each input with its source and date at the point of entry, so the paragraph 22 rationale is already on file instead of rebuilt under deadline pressure.

If you want a read on where your organization’s climate disclosure stands today, including scenario-analysis readiness specifically, the free SSBJ Readiness Check scores preparedness across seven axes in about three minutes.