IFRS S2 Climate-related Disclosures is a reporting standard issued by the International Sustainability Standards Board (ISSB) in June 2023, alongside its companion standard IFRS S1 (general sustainability disclosures). It is designed to give investors and capital markets a consistent, comparable picture of how climate change affects a company's prospects, cash flows, and access to finance.
The standard requires entities to disclose information across four pillars borrowed from the Task Force on Climate-related Financial Disclosures (TCFD) framework, which the ISSB absorbed in 2023:
- Governance of climate-related risks and opportunities
- Strategy, including resilience assessed through climate scenario analysis
- Risk management processes for identifying and prioritising climate risks
- Metrics and targets, notably Scope 1, Scope 2, and Scope 3 greenhouse gas emissions measured using the GHG Protocol, plus any internal carbon prices and executive remuneration linked to climate
IFRS S2 applies to both physical risks (such as flooding or heat stress to assets) and transition risks (policy, technology, and market shifts associated with decarbonisation). Industry-specific guidance draws on the SASB Standards, which the ISSB also inherited.
The standard is voluntary at the global level but becomes binding when adopted by national regulators. Jurisdictions including the United Kingdom, Australia, Canada, Japan, Brazil, Singapore, Hong Kong, and Nigeria have announced roadmaps to incorporate or align with IFRS S2. The International Organization of Securities Commissions (IOSCO) endorsed both ISSB standards in July 2023, urging its 130+ member regulators to consider adoption.
For Model UN and policy researchers, IFRS S2 is significant because it represents a market-led, investor-focused complement to state obligations under the Paris Agreement. It differs from the EU's Corporate Sustainability Reporting Directive (CSRD), which uses a "double materiality" lens covering impacts on people and planet, whereas IFRS S2 applies single (financial) materiality — disclosing only what is material to enterprise value.
Example
In September 2024, Australia's parliament passed legislation requiring large companies to begin mandatory climate disclosures aligned with IFRS S2, with phased implementation starting January 2025.
Frequently asked questions
IFRS S2 uses single (financial) materiality, focusing on risks to enterprise value for investors. The CSRD applies double materiality, also requiring disclosure of a company's impacts on society and the environment.
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