IFRS S2 — Climate-related Disclosures

Definition

IFRS S2 is the International Sustainability Standards Board’s first topic-specific sustainability disclosure standard. It governs the disclosure of climate-related risks and opportunities that could reasonably be expected to affect an entity’s cash flows, access to finance, or cost of capital over the short, medium, or long term.

IFRS S2 was issued in June 2023 alongside IFRS S1 (the general framework) and is effective for annual reporting periods beginning on or after 1 January 2024 in jurisdictions that adopt it. It is the climate-specific application of the IFRS S1 general framework — S1 sets the architecture; S2 fills in the climate content.

The four-pillar architecture (from TCFD)

IFRS S2 inherits its structure directly from the Task Force on Climate-related Financial Disclosures (TCFD). Each disclosure objective maps to one of four pillars:

Governance

The processes, controls, and procedures the entity uses to monitor, manage, and oversee climate-related risks and opportunities. Specific disclosures include:

• The body or individual responsible for oversight
• How climate competence is built into governance (board skills, training)
• How climate considerations are integrated into strategy, capital allocation, risk management, and performance objectives + remuneration

Strategy

The entity’s strategy for managing climate-related risks and opportunities. Key disclosures:

• Identified climate risks (physical + transition) and opportunities
• How they affect the entity’s business model, value chain, strategy, financial planning
• Current and anticipated financial effects (qualitative + quantitative where decision-useful)
• Climate resilience of the entity’s strategy, including scenario analysis
• Transition plans, if any, including emissions targets and mitigation + adaptation actions

Risk management

The processes used to identify, assess, prioritise, and monitor climate-related risks and opportunities. Disclosures include:

• Input parameters used for risk identification
• How the entity integrates climate risks into overall enterprise risk management
• Changes in process from the prior reporting period

Metrics + targets

The metrics + targets the entity uses to measure + manage climate performance. This pillar is the most data-intensive and includes:

• Cross-industry metrics (mandatory for all entities)
• Industry-specific metrics (from SASB-derived industry guidance)
• Entity-specific metrics the entity itself uses

Cross-industry metrics — what every IFRS S2 filer must disclose

IFRS S2 prescribes seven cross-industry metrics that apply to all entities regardless of sector:

1. Greenhouse gas (GHG) emissions — Scope 1, Scope 2, Scope 3, measured per the GHG Protocol Corporate Standard (revised edition) — with disaggregation by greenhouse gas, by consolidation approach, and by jurisdiction where material
2. Climate-related transition risks — amount and percentage of assets or business activities vulnerable to transition risks
3. Climate-related physical risks — amount and percentage of assets or business activities vulnerable to physical risks
4. Climate-related opportunities — amount and percentage of assets or business activities aligned with opportunities
5. Capital deployment — amount of capital expenditure, financing, or investment deployed toward climate-related risks and opportunities
6. Internal carbon prices — explanation of carbon-price application, including price per metric tonne CO₂-equivalent
7. Remuneration — percentage of executive remuneration linked to climate-related considerations, and how it is incorporated

Scope 3 emissions — the high-stakes disclosure

IFRS S2 requires Scope 3 disclosure across all 15 GHG Protocol Scope 3 categories (upstream + downstream) where material to the entity’s value chain. This is the most operationally challenging requirement in the standard because it requires data from suppliers, customers, downstream users, and franchises that the entity does not directly control.

The ISSB provided two transition reliefs at issuance to ease first-year adoption:

• Scope 3 deferral: entities can defer Scope 3 disclosure for the first annual reporting period in which they apply IFRS S2
• One-year reporting alignment relief: entities can report sustainability disclosures separately from (rather than at the same time as) financial statements in year one

Both reliefs are one-time. From year two onward, Scope 3 is mandatory and sustainability + financial disclosures must align in timing.

Scenario analysis

IFRS S2 mandates climate-resilience disclosure using scenario analysis — modelling the entity’s strategy and financial performance against multiple plausible future climate states. The standard does not prescribe specific scenarios, but the entity must explain:

• The scenarios used (typically including a ≤2°C-aligned scenario and at least one higher-warming scenario)
• The methodology, assumptions, and time horizons
• The financial implications under each scenario
• How the analysis informed the entity’s strategy + targets

Scenario sources typically used include IEA Net Zero by 2050, IPCC SSP / RCP scenarios, NGFS scenarios for financial institutions.

Industry-specific metrics (SASB-derived)

IFRS S2 incorporates the SASB Standards industry-specific metrics through its Industry-based Guidance document. SASB Standards (originally Sustainability Accounting Standards Board, now under IFRS Foundation stewardship since 2022) define ~77 industry-specific metrics per the Sustainable Industry Classification System (SICS).

For example:

• Oil + Gas — Exploration + Production: flared hydrocarbons, methane intensity, water management in operations
• Construction Materials (Cement): clinker production CO₂ intensity, alternative fuel share
• Banks (Commercial): financed emissions per asset class, climate-related credit exposure
• Airlines: passenger CO₂ per available seat-kilometre

IFRS S2 entities must disclose the SASB-derived industry metrics applicable to their primary business activities, in addition to the cross-industry metrics.

IFRS S2 + India

India has not yet mandated IFRS S2. The current Indian baseline is SEBI’s BRSR Format + BRSR Core, which has overlapping but not identical climate disclosures:

Dimension	IFRS S2	SEBI BRSR / BRSR Core
Architecture	Four TCFD pillars	NGRBC 9 Principles
Materiality	Financial materiality (investor-oriented)	Single materiality (broad stakeholder)
GHG scope	Scope 1 + 2 + 3 mandatory (S3 phased)	Scope 1 + 2 (Principle 6 essential); Scope 3 voluntary
Scenario analysis	Mandatory	Not required in core BRSR; voluntary disclosure
Industry metrics	SASB-derived (~77 industries)	Generic BRSR; sector-specific overlays via ICAI Background Material
Assurance	Not prescribed (ISAE 3000/3410 typically used)	Reasonable assurance for BRSR Core (Top 1,000 listed entities phased)

ICAI Background Material on BRSR (Revised 2024) explicitly cross-references TCFD / IFRS S2 / GRI disclosure points to BRSR fields where alignment exists, enabling dual-purpose data collection. Large Indian listed entities with foreign investor base or overseas listings often produce an IFRS S2-aligned voluntary disclosure alongside the SEBI-mandated BRSR.

For where IFRS S2 sits within the broader sustainability-disclosure ecosystem, see the ISSB glossary entry. For how IFRS S2’s investor-financial-materiality lens compares to GRI’s impact-materiality lens, see the GRI glossary entry.

Interoperability with EU CSRD / ESRS

The EU’s CSRD regime, operationalised through European Sustainability Reporting Standards (ESRS), uses a double materiality approach (financial + impact materiality), making it broader in scope than IFRS S2 alone. See the CSRD Disclosure Framework for the post-Omnibus thresholds, India-relevance cases, and standards architecture.

In May 2024, EFRAG and the IFRS Foundation jointly issued interoperability guidance mapping ESRS climate disclosures to IFRS S2 requirements. Key findings:

• Climate scenario analysis — closely aligned; entities can satisfy both with one analysis
• GHG emissions (Scope 1/2/3) — methodology aligned (GHG Protocol); ESRS adds slightly more granular disaggregation requirements
• Transition plan disclosure — both regimes require it; IFRS S2 framing is investor-focused, ESRS adds impact framing
• Cross-industry metrics — most metrics overlap; differences in capex disclosure framing and internal carbon price disclosure

An entity that complies with ESRS E1 (climate) generally satisfies the bulk of IFRS S2 with limited additional work — provided the entity also frames disclosures around financial materiality for the IFRS S2 audience.

Assurance over IFRS S2 disclosures

IFRS S2 does not prescribe an assurance standard. Where assurance is voluntarily obtained (or jurisdictionally mandated, as in some adopting jurisdictions), the standards typically used are:

• ISAE 3000 (Revised) — broad sustainability information
• ISAE 3410 — GHG statements specifically (Scope 1 + 2 + 3)
• SAE 3410 — ICAI’s Indian equivalent of ISAE 3410, used for Indian-mandate GHG assurance

For IFRS S2-aligned voluntary disclosure with reasonable assurance routed through a partner CA firm, see BatchWise BRSR Core Assurance — the engagement scope can be configured to deliver BRSR + an aligned IFRS S2 / TCFD package off the same GHG inventory.

Common questions

Is IFRS S2 mandatory anywhere yet? Yes — Australia, the UK, Japan, Singapore, Brazil, Canada, and others have issued adoption roadmaps. Indian listed entities are not yet required to apply IFRS S2 by SEBI or ICAI.

Does IFRS S2 require Scope 3 in year one? No — entities can use the transition relief to defer Scope 3 disclosure to year two of applying IFRS S2.

What if the entity has no material climate risk? IFRS S2 requires disclosure of how the entity has assessed materiality and concluded none is material. A blanket “not applicable” without methodology disclosure does not satisfy the standard.

Does IFRS S2 replace the SEC climate disclosure rule for US-listed companies? No — they are separate regimes, although conceptually aligned. US-listed Indian companies should track both.

What is the relationship between IFRS S2 and ISO 14068? ISO 14068 (carbon neutrality / net zero claims) is a separate ISO standard for substantiating net-zero claims. IFRS S2 covers disclosure of an entity’s climate strategy + emissions + targets but does not certify net-zero or carbon-neutral claims. Entities making such claims under ISO 14068 still disclose them under IFRS S2 where material.