Introduction

The objective of IFRS S2 Climate-related Disclosures is to provide users of general purpose financial reports with decision-useful information regarding climate-related risks and opportunities. This includes information that could reasonably be expected to affect an entity’s cash flows, access to finance, or cost of capital over various time horizons. Entities may pursue mitigation efforts, such as reducing greenhouse gas (GHG) emissions, or adaptation responses to improve resilience to physical risks. As part of their strategy to create value, entities often set strategic goals related to their transition towards a lower-carbon and climate-resilient economy.

Transition planning is defined as the strategic process followed to set transition-related goals and plan actions. A climate-related transition plan is the outcome of this process, laying out targets, actions, or resources. While IFRS S2 does not mandate the creation or publication of a formal transition plan, it requires the disclosure of information about such plans if they exist. This ensures transparency regarding the processes and policies an entity has in place to manage its climate-related transition.

About this guidance document

This document provides guidance for entities to provide high-quality information about their transition when applying IFRS S2. It builds on disclosure-specific material authored by the Transition Plan Taskforce (TPT), for which the IFRS Foundation assumed responsibility in 2024 to reduce disclosure fragmentation. The guidance does not change the requirements of the Standards but aids stakeholder understanding. It is particularly useful for entities that have set strategic goals or are in the process of developing formal transition plans.

In accordance with IFRS S1, entities must disclose material information. Information is considered material if omitting, misstating, or obscuring it could reasonably be expected to influence the decisions of primary users, such as investors and lenders. Entities are permitted to include required information by cross-reference to other reports, such as a formal transition plan document, provided the cross-referenced material is available on the same terms and at the same time as the primary disclosures.

How to apply the disclosure requirements in IFRS S2

Governance

Entities must enable users to understand the governance processes used to monitor and oversee climate-related risks and opportunities. This involves identifying the governance bodies or individuals responsible for oversight and disclosing how these responsibilities are reflected in mandates and role descriptions. Key disclosures include how the body determines the availability of appropriate skills and competencies and how frequently it is informed about climate issues. Furthermore, entities should disclose the percentage of executive management remuneration linked to climate-related considerations, providing averages or ranges where practices vary across the executive population.

Strategy

Under the strategy pillar, entities disclose the effects of climate-related risks and opportunities on their strategy and decision-making. If an entity has a formal transition plan, it must disclose key assumptions and dependencies. Dependencies are critical factors for implementation, such as workforce capabilities, ecosystem services (e.g., water availability), or the availability of emission removal technologies. Key assumptions may involve policy actions, the speed of grid decarbonisation, macroeconomic trends, and technological innovation costs.

Entities must also describe current and anticipated changes to their business model and value chain. This includes downstream changes to product portfolios, internal operational shifts like moving to renewable energy, and upstream changes in supply chain procurement. Regarding resourcing, entities should disclose planned capital expenditure for transition activities in absolute terms and relative to total capital expenditure. Financial effects on position, performance, and cash flows must be disclosed, using all reasonable and supportable information available without undue cost or effort. Quantitative information may be provided as a single amount or a range, though qualitative information is acceptable if measurement uncertainty is prohibitively high.

Metrics and targets

Entities are required to disclose absolute gross GHG emissions (Scope 1, 2, and 3) in metric tonnes of CO2 equivalent, measured in accordance with the Greenhouse Gas Protocol unless otherwise required by jurisdictional authorities. Additional metrics include capital deployment towards climate-related risks and internal carbon prices used in decision-making. For climate-related targets, entities must disclose the metrics used, the objective (e.g., mitigation), the base period, and milestones. If net GHG emissions targets are set, the entity must separately disclose the associated gross GHG target and the intended use of carbon credits, including the third-party schemes used for verification.

Sector summary

The guidance refers to the TPT Sector Summary, which includes recommendations for 30 sectors. Specific illustrative examples are provided for seven key sectors, including banking, oil and gas, and metals and mining, to help preparers interpret how to apply IFRS S2 requirements to their specific industrial contexts.