IFRS S2 climate-related disclosures

What does IFRS S2 require?

IFRS S2 works alongside IFRS S1, which sets general requirements for sustainability disclosures. Its disclosures are organised in four areas:

• Governance: how the board and management oversee climate-related risks and opportunities.
• Strategy: the climate risks and opportunities the company faces, physical and transition, their effects on its business model and value chain, its transition plan if it has one, the current and anticipated effects on its financial position, performance and cash flows, and the resilience of its strategy, assessed using climate scenario analysis. See current and anticipated financial effects.
• Risk management: how it identifies, assesses and manages climate risks.
• Metrics and targets: greenhouse gas emissions, cross-industry metrics on transition and physical risks, opportunities, capital deployment, internal carbon prices and remuneration, industry-based metrics, and its climate targets. See ESG KPIs, industry-based metrics and net zero targets.

See sustainability reporting explained. For transition plans, see climate transition plans.

How are emissions reported under IFRS S2?

Companies disclose gross scope 1, 2 and 3 emissions in tonnes of CO2 equivalent, measured under the GHG Protocol Corporate Standard unless a relief applies. Scope 2 is disclosed on a location basis, with information about contractual instruments such as certificates that helps users understand the market-based picture. Scope 3 covers the categories of the value chain that are relevant, and financial institutions disclose financed emissions. Companies explain their measurement approach, inputs and assumptions. See calculating scope 1 and 2 emissions and the two scope 2 methods. See the 15 scope 3 categories and the spend-based method. Banks and insurers measure financed emissions with the PCAF standard; see financed emissions.

IFRS S2 climate-related disclosures: a manufacturer's first report

A manufacturer adopts IFRS S2 in a country that requires it from this year. Its scope 1 emissions are 2,440 tonnes and its location-based scope 2 emissions 8,000 tonnes; it explains that renewable certificates cover part of its electricity, which would give 3,600 tonnes on a market basis. Using the first-year relief, it does not yet report scope 3. To show the anticipated financial effects of carbon pricing on its direct emissions, it calculates the annual cost of its scope 1 emissions under carbon prices used in its scenarios.

At US$ 100 a tonne, its scope 1 emissions would cost about 244 thousand a year. It explains how it would respond, such as replacing gas boilers with heat pumps, the capital that would need, and how the same carbon price assumptions are used in its impairment testing, so that its sustainability disclosures and financial statements are consistent. See climate risk in the financial statements and IAS 36 impairment. See climate risk in impairment testing.

How much scenario analysis is required?

IFRS S2 requires a company to assess its climate resilience using scenario analysis, but the approach is proportionate: it should be commensurate with the company's circumstances, using reasonable and supportable information available without undue cost or effort, and taking account of its skills, capabilities and resources. A smaller company can use qualitative scenarios; a company with high exposure, such as an energy producer, is expected to use quantitative analysis. Companies disclose the scenarios used, including whether one is aligned with the latest international agreement on climate change. See climate scenario analysis.

What reliefs apply in the first year?

In its first annual reporting period, a company may report on climate only, applying IFRS S1 just to climate; need not disclose comparative information; need not disclose scope 3 emissions, and in the second year need not provide scope 3 comparatives; may keep using a measurement method other than the GHG Protocol if it used one before; and may publish its sustainability disclosures after its financial statements, at the same time as its next interim report. Many adopting countries have added longer phase-ins. See ISSB transition reliefs.

What did the December 2025 amendments change?

The ISSB issued targeted amendments to IFRS S2 on 11 December 2025, effective for annual periods beginning on or after 1 January 2027, with early application permitted. They let financial institutions limit category 15 of scope 3 to financed emissions, from loans, bonds, equity and undrawn commitments, and exclude derivatives, with qualitative disclosure; allow an industry classification other than GICS when disaggregating financed emissions; and allow companies required by law to use other measurement methods or global warming potential values to do so, for the parts of the business affected. See the December 2025 IFRS S2 amendments.

Who must apply IFRS S2?

The ISSB standards apply only where a country or regulator adopts them, or where a company chooses to. A growing number of jurisdictions have adopted them or issued local standards based on them, often starting with listed or large companies and with climate first, for example Australia, whose climate standard based on IFRS S2 has applied to large companies since 2025, and Japan, whose standards are aligned with the ISSB's. In the EU, companies in scope of the CSRD use the ESRS, which are largely interoperable with IFRS S2 on climate. See the revised ESRS, California SB 253 and California SB 261, whose climate risk reports can follow IFRS S2. See ISSB adoption by country.

This guide is general information. It is not tax or legal advice for your situation.