RM3.2: Transition Risk Impact Assessment
Maximum Score
0.54 points
Prefill
Eligible
Validation
Evidence is manually validated
2026 Updates
None
Does the entity have a systematic process to assess the material financial impact of transition risks on the business and/or financial planning of the entity?
Assessment Instructions
Intent: What is the purpose of this indicator?
This indicator intends to assess whether and how the entity uses a systematic approach for assessing the impact of transition risks on the business, operations, and/or financial planning of an entity.
Impact assessments are critical to understanding how specific risks manifest themselves in the business, operations, and/or financial planning of an entity. The most sophisticated of these assessments address elements of probability and uncertainty, and translate them into financial outcomes that may then be used to inform strategic and tactical decision making.
Input: How do I complete this indicator?
Instructions apply to first-year fund participants or funds that materially changed their management practices since last year's assessment.
Select Yes or No: If selecting 'Yes', select all applicable sub-options. It is possible to report using the ‘Other’ answer option. Ensure that the ‘Other’ answer provided is not a duplicate or subset of another option.
Terminology
Entity
Related specifically to the named entity, where entity is defined as the investable asset for which participants submit an Assessment response. This option should be selected if the scope of the reporting (e.g., Annual Report) includes actions or performance disclosure that is in direct reference to, and/or matches, the entity completing the GRESB submission. This could be an Annual Report that is solely applicable to the entity or includes specific and detailed actions/performance of the entity.
Entity-level
Explicitly applicable to the reporting entity as identified in EC1. Note that references to the overarching fund and/or group of which the reporting entity is part do not imply entity-level applicability.
Fund-of-Funds (FoF)
A Fund-of-Fund (FoF) is an investment fund that allocates capital across multiple underlying investment funds rather than directly investing in individual assets, securities, or properties. In the context of GRESB Fund and Asset Assessments, a FoF entity will use the practices of its underlying funds to report and be measured on sustainability performance.
Material financial impact
In the context of this indicator, material financial impact is used in accordance with its use by the TCFD to express information about impacts on an entity and its financial manifestations insofar as such information is deemed to be material. As per the TCFD, “in determining whether information is material ... organizations should determine materiality for climate-related issues consistent with how they determine the materiality of other information included in their financial filings.” Furthermore, “asset managers and asset owners should consider materiality in the context of their respective mandates and investment performance for clients and beneficiaries.”
Systematic impact assessment process
A process for assessing the impacts on the business, strategy, financial performance, and/or financial planning of an entity in a way that is structured, repeatable, undergone at regular intervals, and designed in such a way that it can delineate between the magnitude of various impacts. The results of such a process assist in understanding the mechanisms and severity of the potential impacts on the entity, as well as serve as a critical input to the identification and implementation of measures meant to manage risks. It may be a standalone process, or it may be a step within another larger risk assessment process. Furthermore, it may leverage quantitative methods (e.g., use of modeling, data analysis, quantitative thresholds) and/or qualitative methods (e.g., expert consultation, working groups).
Transition risks
The risks associated with the transition to a lower-carbon global economy. These risks most commonly relate to policy and legal developments, technological changes, market responses, and reputational concerns. These risks are particularly relevant for actors with high GHG emissions within their value chain and are thus sensitive to policy and regulatory actions aimed at emissions reductions, energy efficiency, etc.
Policy and legal risk
Policy risk derives from policy action that either tries to constrain actions which contribute to climate change, or to promote adaptation to climate change. Legal risk arises from an increase in climate-related litigation, for instance due to failure of an organization to properly communicate and account for its interactions with the climate.
Technology risk
New technologies may displace old systems and disrupt existing parts of the economic system. Therefore, technological improvements and innovations can affect competitiveness, production and distribution costs, and potentially the demand for certain products and services, thus resulting in considerable uncertainty.
Market risk
Market risk refers to shifts in supply and demand for certain commodities, products, and services due to the broader transition towards a lower-carbon economy.
Reputation risk
The risk around changing customer or community perceptions of an entity’s contribution or detraction from the transition to a low-carbon economy.
Validation: What evidence is required?
Evidence
The evidence and open text box will be subject to manual validation.
However, GRESB will automatically apply the previous year's validation decision for previous fund participants, provided the indicator response and documentation remain consistent (i.e., the entity does not modify its selections or evidence). Read more here.
The evidence should sufficiently support all the items selected for this question. If a hyperlink is provided, ensure that it is active and that the relevant page can be accessed within two steps. It is possible to upload multiple documents, as long as it’s clear where information can be found.
The provided evidence must cover the following elements:
Demonstrate that there is a systematic risk identification process for transition risks in place and not simply a generic “climate-related risk” assessment;
Demonstrate outcomes of the transition risk identification assessment. It is expected that the document list/state which risks, or lack thereof, were identified as a consequence of the risk assessment having been carried out.
The outcome-based information must pertain to the entity/portfolio in question and not only to the manager/group/business-unit level. Note: For fund-of-funds, entity-level applicability must be explicitly established.
The risk assessments must apply to the reporting year or two years prior (2025, 2024, 2023).
Examples of appropriate evidence include, but are not limited to:
For Process: A document describing the entity’s process towards transition risk assessments or other tangible proof of the entity's risk assessment activity. This process-based information can include materiality determinations, scenario analyses, modeling, or reviews of legislation.
For Outcomes: An extract of a procedure undertaken such as a risk register or matrix, checklists, scenario analysis or a section of a risk framework or risk management plan addressing transition risks. Such documents can help exhibit the outcomes of the risk assessments.
For Entity-level Outcomes: Entity-level documentation that highlights specific transition risks identified for the entity. If using group-level documentation, ensure the outcomes relevant to the entity are explicitly highlighted within the broader assessment.
Other Answer
State the other transition risk issue. It is not subject to automatic or manual validation but is used for reporting purposes only.
Scoring
Scoring: How does GRESB score this indicator?
The scoring of this indicator is equal to the sum of the fractions assigned to the selected options and respective sub-options, multiplied by the total score of the indicator.
Evidence: The evidence is manually validated and assigned a multiplier, according to the table below. The evidence must support the validation requirements.
If any requirements are not met, the evidence may be partially accepted or not accepted, depending on the level of alignment with the requirements.
Accepted
2/2
Partially Accepted
1/2
Not Accepted
0
Get Support: Solution Providers
GRESB Solution Providers are independent, third-party organizations within the GRESB Partner network that offer specialized products, tools, and services to support sustainability performance outside the GRESB Assessment process.
The organizations below deliver commercially available solutions designed to help drive improvement for this indicator. Engagement is managed directly between the reporting entity and the Solution Provider.
GRESB will continue to update this section as the GRESB Solution Provider network grows. Please check back regularly to find GRESB Solution Providers who can support your sustainability performance.
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