The International Sustainability Standards Board (ISSB) has introduced a series of targeted changes to its IFRS S2 climate-reporting standard, designed to ease the burden on financial firms grappling with the complexities of greenhouse gas (GHG) disclosures.
The amendments focus heavily on clarifying how institutions such as banks, asset managers and insurers should calculate and report emissions linked to their financing activities—helping to address challenges identified as companies began putting the standard into practice.
The ISSB, launched by the IFRS Foundation in 2021 at COP26, aims to create a global baseline for sustainability disclosures that better inform investors about climate-related risks and opportunities. Since releasing the inaugural IFRS S1 and S2 standards in June 2023, around 40 jurisdictions have begun taking steps towards adopting the rules. As firms advanced in their reporting preparations, the ISSB found that certain requirements—particularly those around financed emissions—needed refinement, prompting a consultation earlier this year and ultimately the amendments announced today.
A central update concerns Scope 3 category 15 emissions, which capture value chain emissions related to investments. The ISSB now makes clear that financial institutions can limit their reporting to emissions attributed to loans and investments made directly by the organisation. For asset managers, this reporting may focus solely on emissions linked to assets under management. Crucially, the ISSB states that emissions stemming from “facilitated” investment banking activities, along with insurance-associated emissions linked to underwriting, are not required disclosures under IFRS S2. Additionally, firms may exclude derivatives from their Scope 3 financed emissions calculations, addressing a significant area of confusion for many early adopters.
The amendments also introduce flexibility for firms reporting financed emissions in commercial banking or insurance. These institutions are no longer required to use the Global Industry Classification Standard (GICS) when breaking down emissions data. Alternative classification systems may now be used, reducing operational complexity for firms whose internal structures do not neatly align with GICS categories. Further adjustments allow companies to use Global Warming Potential (GWP) values mandated by local regulators, even if they differ from the latest Intergovernmental Panel on Climate Change (IPCC) assessments. The ISSB has also clarified the jurisdictional relief permitting firms to use GHG measurement methodologies other than the Greenhouse Gas Protocol when local rules require it.
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.”
The changes are expected to provide financial firms with more practical and achievable pathways to compliance, while maintaining the standards’ objective of improving climate transparency for global markets.
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