Objective

The primary objective of this standard is to provide principles for entities to disclose material information regarding climate-related risks and opportunities. This information is intended to assist primary users of general purpose financial reports in discharging accountability and making informed decisions. Specifically, the standard requires disclosure of information that could reasonably be expected to affect an entity’s long-term fiscal sustainability, which includes its ability to meet service delivery and financial commitments both now and in the future.

Scope

Entities must apply this standard when reporting on climate-related physical risks, transition risks, and available opportunities. Physical risks include both acute events, such as storms and floods, and chronic shifts in climatic patterns, like rising sea levels or reduced water availability. Transition risks arise from efforts to move towards a lower-carbon economy. This standard is applicable regardless of whether an entity’s financial statements are prepared in accordance with IPSAS Standards or other accounting principles.

Definitions

Key terms include climate resilience, which is an organisation’s capacity to adjust to climate-related changes, and value chain, referring to the full range of interactions and relationships related to an operational model. The standard defines various emission categories, such as direct Scope 1 emissions, indirect Scope 2 emissions from purchased energy, and Scope 3 emissions occurring in the value chain. Other definitions cover carbon credits, internal carbon prices (including shadow prices and internal taxes), and global warming potential.

Governance

Disclosures on governance aim to enable users to understand the processes, controls, and procedures used to monitor and oversee climate-related risks and opportunities. Entities must identify the governing bodies or individuals responsible for this oversight and disclose how these responsibilities are reflected in mandates and role descriptions. Information should also be provided on how the body maintains appropriate skills and competencies and how frequently it is informed about climate-related issues.

Strategy

The strategy disclosures explain how an entity manages climate-related risks and opportunities. This includes current and anticipated effects on the operational model, value chain, and financial planning over the short, medium, and long term. A core requirement is the use of climate-related scenario analysis to assess strategic resilience. Entities must disclose the inputs, assumptions, and time horizons used in these analyses, alongside the entity’s capacity to adapt existing assets and resources to future climate developments.

Risk management

Entities are required to disclose the processes used to identify, assess, prioritise, and monitor climate-related risks and opportunities. This includes detailing the inputs used, whether scenario analysis informs identification, and how the entity assesses the likelihood and magnitude of potential effects. The standard further requires information on the extent to which these processes are integrated into and inform the entity’s overall risk management framework.

Metrics and targets

Performance must be disclosed against specific metric categories, including absolute gross greenhouse gas emissions expressed as metric tons of CO2 equivalent. These are classified into Scope 1, Scope 2 (using a location-based approach), and Scope 3 emissions. Entities must also disclose the percentage of operating activities or assets vulnerable to transition and physical risks. Additional metrics include internal carbon prices and remuneration linked to climate considerations. Progress towards quantitative and qualitative targets, such as those required by international agreements, must be reported annually.

Effective date and transition

The standard is effective for annual reporting periods beginning on or after 1 January 2028, with earlier application permitted. Transition reliefs are available, including an exemption from providing comparative information in the first year of adoption. Entities are not required to disclose Scope 3 greenhouse gas emissions within the first three years of application. Furthermore, in the first annual reporting period, entities may publish their climate-related disclosures within nine months of the end of the period, potentially after their financial statements.

Appendix B: General requirements for climate-related disclosures

This appendix defines general purpose financial reports and primary users, which in the public sector include service recipients and resource providers. It establishes the conceptual foundations of relevance and faithful representation. Information is considered material if omitting, misstating, or obscuring it could reasonably be expected to influence the discharge of accountability or decisions made by primary users. Entities must also ensure connectivity between climate disclosures and their related financial statements.

Basis for conclusions

The standard is primarily based on IFRS S2, with public sector adaptations. The IPSASB prioritised alignment with private sector guidance to ensure interoperability and consistency across value chains. Proportionality mechanisms are included to support capacity building, allowing entities to use reasonable and supportable information available without undue cost or effort. The standard is agnostic to the financial reporting basis, supporting entities using either accrual or cash accounting.

Illustrative examples

Hypothetical situations illustrate the application of disaggregation requirements for greenhouse gas emissions. Examples cover disaggregating Scope 1 and 2 emissions between a consolidated accounting group and investees using the equity share method. Further examples demonstrate disaggregating Scope 3 emissions by categories such as upstream transportation and waste, and disaggregating emissions by constituent gases like methane. Finally, examples illustrate disaggregation by public sector function, such as policy design versus service delivery.