This article was first published on iklimriskleri.com and migrated with a July 2026 update.
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Physical climate risks — floods, extreme heat waves, storms, and long-term climate shifts — can damage corporate assets, disrupt supply chains, and hurt financial performance. Disclosure of physical climate risk is now converging on a common global backbone: IFRS S2 Climate-related Disclosures, issued by the ISSB in June 2023 and built on the TCFD framework, and — in the EU — the CSRD and its ESRS. In Türkiye, IFRS S2 is adopted domestically as the Türkiye Sustainability Reporting Standards (TSRS). Here is how the three treat physical climate risk, and where TSRS fits for IFRS S2 reporters.
The 30-second summary
- IFRS S2 was issued by the ISSB in June 2023, builds on the TCFD’s four pillars, applies to reporting periods beginning on or after January 1, 2024, and uses financial materiality.
- The EU’s CSRD / ESRS uses double materiality; Omnibus I (March 18, 2026) narrowed it to companies above 1,000 employees and EUR 450 million in turnover.
- Türkiye adopts IFRS S2 as TSRS: published December 29, 2023, effective January 1, 2024, with TSRS 2 covering acute/chronic physical climate risks.
- The KGK doubled Türkiye’s thresholds on January 16, 2026, but banks stay in scope regardless of size; the first TSRS reports appeared in the fall of 2025.
- Limited assurance audits begin with FY2025 reports — the same path the EU has settled on.
How IFRS S2 Handles Physical Climate Risk
Almost every climate framework starts from the TCFD, which splits climate risks into physical and transition and defines physical risks as acute (hurricanes, floods, severe storms) and chronic (rising average temperatures, sea level rise, permanent shifts in precipitation patterns). Its signature method is scenario analysis: reporting how resilient a strategy is under different climate scenarios. In 2024 the TCFD’s monitoring responsibilities passed to the ISSB, putting climate disclosure under one global roof.
IFRS S2: Climate-related Disclosures, issued by the ISSB in June 2023, turned the TCFD recommendations into a global standard and kept its four pillars — Governance, Strategy, Risk Management, and Metrics and Targets. Effective for annual reporting periods beginning on or after January 1, 2024, it centers on financial materiality: the impact of climate risks on cash flows, asset values, and profitability. A company discloses, for example, its critical facilities’ exposure to flood or extreme heat and how its business plan fares under a 2°C or 4°C warming scenario. This investor-focused lens carries into every jurisdiction adopting IFRS S2, Türkiye included.
The EU Angle: CSRD after Omnibus
In the EU, physical climate risk sits inside the CSRD and ESRS under double materiality: companies report both how climate risk affects them financially and how their own activities affect climate and society — the single biggest divergence from IFRS S2, which is financial-materiality only. The European side was redrawn in 2026: the Omnibus I Directive (EU) 2026/470 entered into force on March 18, 2026, so the CSRD now covers only companies with more than 1,000 employees and over EUR 450 million in turnover, and listed SMEs dropped out. The new scope applies from fiscal year 2027 (first reports in 2028); for groups headquartered in Türkiye, the threshold is EUR 450 million in EU turnover (with subsidiary/branch turnover above EUR 200 million), with first reporting in 2029 for fiscal year 2028.
Content is streamlined too: ESRS datapoints shrink by more than 70 percent, the revised ESRS is expected by June 2026, sector-specific ESRS were dropped, and the reasonable assurance target was removed, making limited assurance permanent. Value chain pressure remains: EU customers can request at most VSME-level information (the voluntary SME standard) from suppliers with fewer than 1,000 employees — and climate risk metrics are part of that core set.
Türkiye: TSRS as the Local Adoption of IFRS S2
TSRS is Türkiye’s national adoption of the ISSB standards, so for IFRS S2 reporters it is familiar territory. Published on December 29, 2023 and in force since January 1, 2024, it makes climate-related financial disclosures mandatory above certain size thresholds under the same financial materiality lens as IFRS S2. The second standard, TSRS 2: Climate-related Disclosures, requires companies to assess short-, medium-, and long-term exposure to physical risks such as floods, storms, and drought, with sector-based guidance adding disclosure and metric recommendations for 68 sub-sectors.
The scope was revised in early 2026. Under the KGK (Public Oversight Authority) decision published in the Official Gazette on January 16, 2026, the thresholds were doubled: for fiscal years starting on or after January 1, 2025, companies exceeding at least two of the criteria below in two consecutive fiscal years are in scope. The critical exception: banks remain within TSRS regardless of size.
| Criterion | Previous threshold | After January 16, 2026 |
|---|---|---|
| Total assets | TRY 500 million | TRY 1 billion |
| Annual net sales revenue | TRY 1 billion | TRY 2 billion |
| Number of employees | 250 | 500 |
Companies recalculating their scope need to update their 2025 and 2026 reporting plans against these new thresholds.
First TSRS Reports and the Assurance Era
After the KGK extended the FY2024 deadline to October 31, 2025, the first TSRS reports appeared in the fall of 2025 — from THY to Arçelik, from VakıfBank to Türk Telekom — publicly available on the KGK portal. First-year reliefs (no comparative information, and no Scope 3 disclosure for the first two years) let companies phase in their reporting.
The assurance clock is ticking too: limited assurance audits kick in with FY2025 reports, making 2026 the year TSRS reports meet independent assurance. Run by sustainability auditors authorized by the KGK, this local validation strengthens both the accuracy of reported physical climate risk figures and the credibility of the reports.
In One Table: IFRS S2, CSRD, and TSRS
Side by side, the row that matters most for a global reporter is materiality — financial under IFRS S2 and TSRS, double under CSRD.
| Dimension | IFRS S2 (ISSB) | CSRD / ESRS (post-Omnibus) | TSRS |
|---|---|---|---|
| Scope (July 2026) | Binding once transposed into national law; forms the basis of TSRS | 1,000+ employees and over EUR 450 million in turnover; new scope applies from fiscal year 2027 | Two of the following in two consecutive periods: TRY 1 billion in total assets / TRY 2 billion in net sales / 500 employees; banks in scope regardless of thresholds |
| Materiality | Financial materiality | Double materiality | Financial materiality (ISSB-based) |
| Physical risk approach | Acute/chronic risks, scenario analysis, climate resilience disclosure | ESRS E1; datapoints simplified by more than 70%, revised ESRS expected by June 2026 | TSRS 2: acute/chronic risks, scenario analysis, implementation guidance for 68 sub-sectors |
| Assurance | No assurance requirement at standard level; depends on local regulators | Limited assurance permanent; the move to reasonable assurance was dropped | Limited assurance, starting with FY2025 reports |
| What it means for a company in Türkiye | Already applied through TSRS | Only large EU-linked groups; others face at most VSME-level supply chain requests | Mandatory national framework |
Why TSRS Matters Even If You Report Under IFRS S2
Built on the ISSB’s IFRS S1 and S2, a TSRS report is understood and accepted in global markets while reflecting Türkiye-specific priorities. TSRS 2 metrics were designed to align with the EU Green Deal’s Carbon Border Adjustment Mechanism (CBAM), the EU Emissions Trading System, and the EU Taxonomy — one report can prepare a company for several regulations at once.
Sector-specific guidance answers “What do I report?”, phased transition and first-year reliefs let capacity grow step by step, and KGK-authorized auditors safeguard quality. In the post-Omnibus era, an already IFRS S2-aligned TSRS report is a strong foundation for meeting EU customers’ VSME-level value chain requests.
How UrClimate Next helps
Standards draw the framework; every reported figure needs defensible evidence behind it. UrClimate Next delivers fast, validated climate projection data on a single platform: the temperature increase, extreme precipitation frequency, or drought risk a specific production facility in Türkiye may face over the next 20 years becomes accessible in a few clicks. Map-based visualizations, risk scoring, and scenario tools accelerate the scenario analyses and climate resilience assessments that IFRS S2, the TCFD, and TSRS require.
UrClimate Score, developed by processing historical weather records, produces location-based risk scores for many meteorological hazards; a rising trend in hailstorm frequency at a planned site, for instance, helps shape investment decisions. We cover the portfolio and collateral side on our banking page.
Conclusion
IFRS S2 and its national adoptions complement each other: the ISSB standards are the common language of international investors, the post-Omnibus CSRD adds a double-materiality layer for the largest groups, and TSRS is the mandatory backbone in Türkiye. Companies reporting under IFRS S2 or TSRS can still reference GRI or ESRS to keep a double materiality perspective. The payoff is tangible: easier access to green finance, a stronger reputation with investors and customers, and a compliance edge in international partnerships.
With limited assurance now in play, the winners will be the companies that treat climate risk not as a liability but as an investment — and put defensible evidence behind every figure. For them, reporting physical climate risks is the key to a business that stays resilient and open to opportunity under changing climate conditions.
