The ISSB fully incorporates the TCFD framework, so let’s first look at the TCFD guidance on scenario analysis.
The TCFD states:
A critical aspect of scenario analysis is the selection of a set of scenarios (not just one) that covers a reasonable variety of future outcomes, both favorable and unfavorable. In this regard, the Task Force recommends organizations use a 2°C or lower scenario in addition to two or three other scenarios most relevant to their circumstances, such as scenarios related to Nationally Determined Contributions (NDCs), physical climate-related scenarios, or other challenging scenarios.
The ISSB is less prescriptive in terms of the number of scenarios to be used:
When selecting scenarios, variables and other inputs to use in climate-related scenario analysis, an entity might, for example, use one or more climate-related scenarios – including international and regional scenarios – that are publicly and freely available from authoritative sources. The entity shall have a reasonable and supportable basis for using a particular scenario or set of scenarios.
We recommend using at least two scenarios, so that your company can holistically consider both favourable and unfavourable outcomes.