IFRS S2 Climate-related Disclosures has been amended following discussions with stakeholders over solutions to specific reporting challenges across 2025.

The ISSB issued an exposure draft earlier this year to start consultation on its proposed amendments – a response to emerging difficulties in the practical application of the S2 standard when it comes to measuring and reporting on greenhouse gas emissions, in particular in relation to scope 3, category 15, which relates to the financial activities of banks and insurers.

The amendments are effective for reporting periods beginning on or after 1 January 2027, with early application permitted.

The amendments

A new paragraph – 29A – has been added to the standard that clarifies what is in scope for scope 3, category 15 emissions. Whereas previously it was unclear as to whether there was an expectation that facilitated emissions, insurance emissions and emissions attributable to derivatives were caught, the ISSB has not confirmed they are out of scope. “This amendment clarifies that an entity is permitted to limit its measurement and disclosure of Category 15 greenhouse gas emissions to financed emissions as defined in the Standard.”

The reliefs being offered by the ISSB reflect the complexity of certain products across banking and insurance. “It is fair to say, we are still at a very early stage in understanding the relationship between say insurance underwriting, the wider supply chain and the intersection with carbon emissions,” says Reuben Wales, ICAEW’s Head of Financial Services. “The quality of both data and methodologies is still under development, and any early mandate to disclose might have undermined the credibility of reporting, so we support the amendments the ISSB has made” 

As part of the initial proposals the ISSB was considering whether to require firms to disclose the amount or magnitude of activities excluded. After consultation it has built in greater flexibility with the standard now asking firms to ”describe the financial activities it has excluded from its measure of Scope 3 Category 15 greenhouse gas emissions”. We support the change given the inevitable challenges firms would have faced in attaining consistency on defining “magnitude”. 

ISSB has also gone through with its commitment not to define what constitutes a derivative.

Originally, the standarda required firms to apply the Global Industry Classification System (GICS). This has now been revised to permit the use of alternative classification systems. 

The amendments clarify the availability of jurisdictional relief from using the Greenhouse Gas Protocol Standard if only part of an entity is required to use a different measurement method. It also introduces jurisdictional relief from using global warming potential values outlined in the IPCC Assessment Report for greenhouse gas emission conversion.

ICAEW argued for most of these measures.

ISSB Vice-Chair Sue Lloyd said: “Our priority in delivering targeted amendments to IFRS S2 GHG emissions disclosure requirements has been to provide a timely response to challenges. We are confident that the amendments will bring real relief to companies applying ISSB Standards without significantly affecting the decision-usefulness of information for investors.”

Biodiversity standards on the way

In its final meeting of the year, the ISSB made the decision to start working on biodiversity, ecosystems and ecosystem services standards (BEES), following a period of research. This will involve the development of disclosure requirements based on investor needs when it comes to nature-related risks and opportunities. The standard will complement the existing S1 and S2 standards.

The ISSB met earlier in December to discuss the steps needed to move the BEES project from ‘research’ to ‘standard-setting’, alongside the need for a project-specific consultative group – agreed by 11 out of 12 members.

An exposure draft will be published in due course as part of this process. The ISSB’s existing advisory groups and consultative bodies will be used for the project. As part of this, ISSB is considering the role of Sustainability Accounting Standards Board (SASB) standards to help address the need for industry-specific information.

“Our research found that there is clear investor demand for this information,” said ISSB’s Vice-Chair Jingdong Hua. “Industry-specific information is also important to investors, and here, the SASB standards, including the feedback we received in our written consultation, will help.

Not every company will have nature-related risks and opportunities, he added. “As with all our standards, disclosures are only required when information is material, which means it has to be financially material, and material for the particular company.”

Human capital disclosures – in research phase

In 2026, ISSB will continue to research needs for human capital disclosures, as part of its considerations for future standards. Human capital includes the people within a company’s workforce, as well as workers across its value chain. Disclosures may include aspects such as workforce composition, compensation, turnover, health and safety, training and development, and employee engagement.