The Introduction section states that this staff guidance sets out an approach for identifying and assessing climate-related risks and opportunities (CRROs), and their associated anticipated impacts and anticipated financial impacts (AFIs). The primary audience is climate reporting entities (CREs) in Aotearoa New Zealand, supporting them in meeting the requirements of the Aotearoa New Zealand Climate Standards (NZ CS). Effective quantification depends on a robust identification and assessment process, and entities are encouraged to apply the phases most relevant to their level of maturity. The External Reporting Board (XRB) expects to publish the final version of this guidance by the end of 2026.

The Approach is structured as a series of five integrated, iterative, and flexible phases. It focuses on internal processes used to generate, organise, and assess information for decision-making. The guidance does not establish disclosure materiality thresholds, as those require separate judgement based on reporting requirements. Scenario analysis is highlighted as a key tool to help identify CRROs, test how they evolve across time horizons, and inform assumptions used in quantification.

Phase 1 set up and scoping involves establishing foundational inputs. Recommendations include forming a cross-functional project team with representatives from strategy, finance, risk, operations, and sustainability. Finance teams are essential for identifying how CRROs connect to financial performance and planning cycles. Entities must develop a high-level value chain map to identify dependencies and concentrations. Defining short-, medium-, and long-term time horizons is also required, ensuring they are linked to strategic planning and capital deployment plans.

Phase 2 identify preliminary set of CRROs aims to create a structured register of potential risks and opportunities across the value chain. Entities are encouraged to use various methods, such as value chain analysis, horizon scanning, and peer reviews. Relevant information sources include internal business plans, national hazard data, and stakeholder engagement. A judgement point is included to determine which CRROs appear sufficiently relevant or consequential to warrant further assessment in subsequent phases.

Phase 3 assess CRROs and their associated anticipated impacts and qualitative AFIs builds an entity-specific understanding of identified items. Risks are analysed using the source of potential harm (hazard or driver), exposure, and vulnerability (sensitivity and adaptive capacity). For example, a construction firm (Example 1) identifies that 40% of its annual revenue is derived from projects directly affected by extreme heat. Entities should develop impact pathways linking the source of harm to operational impacts and qualitative AFIs, such as potential revenue loss or increased operating costs. Significance is evaluated based on the scale, nature, timing, and strategic relevance of these impacts.

Phase 4 quantify AFIs where appropriate focuses on assessed readiness. CRROs are categorised into Category 1 (proceed with quantification) or Category 2 (defer and monitor). Readiness factors include data availability, attribution feasibility, and decision-usefulness. For Category 1 items, impact pathways are translated into calculation pathways. Example 7 quantifies a flooding event at a distribution centre handling 35% of sales, estimating a $4.2 million revenue loss and $630,000 in higher operating costs. Example 8 models carbon pricing for a manufacturer, showing a potential reduction in operating profit of $8–10 million, representing 16%–20% of current total operating profit.

Phase 5 monitor and review ensures the analysis remains current. Monitoring should be anchored around triggers like changes in the external environment, internal strategy, or analytical capability. A targeted refresh may be sufficient if changes are limited, but a comprehensive reassessment may be necessary for significant shifts in business activity. Periodic comparisons of previous expectations with actual outcomes can help refine assumptions and improve future assessments.

Using the outputs of this approach in strategy, transition planning, and disclosures explains how these insights strengthen internal resilience. The outputs support strategic thinking regarding business model implications and capital allocation. The identified pathways provide critical input for transition planning, helping entities determine which actions to prioritise over time and providing a structured basis for climate-related disclosures.