IFRS S2: Climate-related disclosures
IFRS S2 sets mandatory climate-related disclosure requirements for entities, covering governance, strategy, risk management, and metrics and targets. It integrates TCFD recommendations and SASB guidance to improve consistency, comparability and decision-useful information for users of general purpose financial reports.
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OVERVIEW
Objective
IFRS S2 Climate-related Disclosures requires entities to disclose climate-related risks and opportunities that could reasonably be expected to affect cash flows, access to finance or cost of capital over the short, medium or long term. The objective is to provide decision-useful information to primary users of general purpose financial reports.
Scope
The Standard applies to climate-related physical risks, transition risks and climate-related opportunities that could affect an entity’s prospects. Risks and opportunities not reasonably expected to affect prospects are excluded. The scope aligns climate information with financial materiality rather than broader impact reporting.
Core content
Governance
Entities must disclose governance processes, controls and procedures used to oversee climate-related risks and opportunities. This includes identifying responsible governance bodies or individuals, how climate responsibilities are embedded in mandates, how often they are informed, and how climate issues are considered in strategy, major transactions and risk management. Disclosure must also cover management’s role, including whether responsibilities are delegated and how controls are integrated with existing internal processes. Duplication with broader sustainability governance disclosures should be avoided where oversight is integrated.
Strateg
Entities are required to describe climate-related risks and opportunities, classify risks as physical or transition, and explain the relevant time horizons. Disclosures must cover current and anticipated effects on the business model and value chain, including where risks and opportunities are concentrated geographically or operationally.
Entities must explain how climate considerations influence strategy and decision-making, including transition plans, mitigation and adaptation actions, resource allocation, capital expenditure, acquisitions or divestments, and dependencies or assumptions underpinning plans. Both qualitative and quantitative information on current and anticipated financial effects on financial position, performance and cash flows is required, over short, medium and long-term horizons, where reasonably estimable. If quantitative information cannot be provided due to measurement uncertainty or capability constraints, entities must explain why and provide qualitative information instead.
Climate resilience must be assessed using climate-related scenario analysis. Entities must disclose key assumptions, scenarios used (including alignment with international climate agreements where relevant), time horizons, and implications for strategy and business model. The sophistication of analysis should be commensurate with risk exposure and available capabilities.
Risk Managemen
Entities must disclose processes used to identify, assess, prioritise and monitor climate-related risks and opportunities, including inputs, data sources and whether scenario analysis is used. Disclosures should explain how climate risks are assessed for likelihood and magnitude, prioritised relative to other risks, monitored over time, and integrated into overall risk management. Changes in processes from prior periods must also be described. Integrated disclosures are encouraged where climate risk management is embedded in enterprise risk frameworks.
Metrics And Targets
The Standard requires disclosure of cross-industry and industry-based metrics, as well as climate-related targets. Mandatory cross-industry metrics include absolute gross greenhouse gas emissions across Scope 1, Scope 2 and Scope 3, measured primarily using the Greenhouse Gas Protocol, with disclosure of methodologies, assumptions and changes. Additional metrics include assets exposed to physical and transition risks, assets aligned with climate opportunities, capital deployed towards climate-related activities, internal carbon prices, and the link between executive remuneration and climate considerations.
Entities must disclose climate-related targets, including greenhouse gas emissions targets, detailing scope, base years, timeframes, interim milestones, whether targets are absolute or intensity-based, and whether net targets rely on carbon credits. Amendments issued in December 2025 provide reliefs and clarifications, particularly for greenhouse gas and financed emissions disclosures, to reduce complexity and duplication during implementation.
