IFRS S1 and S2 explained: ISSB standards, Scope 3 and adoption
IFRS S1 and S2 are the two sustainability disclosure standards issued by the International Sustainability Standards Board (ISSB) in June 2023. IFRS S1 sets the general requirements for disclosing sustainability-related risks and opportunities that could affect a company's prospects; IFRS S2 sets the specific requirements for climate, including Scope 1, 2 and 3 greenhouse gas emissions. They apply only where a jurisdiction adopts them or a company opts in, and a growing number of regulators now build their rules on them.
What the ISSB standards are for
The ISSB standards are written for investors and lenders. They ask one question: which sustainability-related risks and opportunities could reasonably be expected to affect the company's cash flows, its access to finance or its cost of capital over the short, medium or long term? This is financial materiality only. Unlike the EU's ESRS, IFRS S1 and S2 do not require you to report your impacts on people and the environment for their own sake (see our guide to double materiality assessment for the difference).
Both standards took effect for annual periods beginning on or after 1 January 2024, but that date means little on its own. The ISSB has no power to require anyone to use them. What matters is the date your regulator sets.
IFRS S1: the general requirements
IFRS S1 provides the architecture. It requires disclosure of material information about all sustainability-related risks and opportunities, organised around four pillars inherited from the TCFD:
- Governance — the board and management processes used to oversee these risks and opportunities.
- Strategy — how they affect the business model, value chain, strategy and financial position, now and in future.
- Risk management — how they are identified, assessed, prioritised and monitored, and how that fits into overall risk management.
- Metrics and targets — how performance is measured, including progress against targets.
IFRS S1 also requires the sustainability disclosures to cover the same reporting entity and period as the financial statements, and to be published at the same time. Where no IFRS standard covers a topic, companies must consider the SASB Standards' industry-based guidance.
IFRS S2 climate disclosure requirements
IFRS S2 applies the four pillars to climate. The main requirements are:
- Climate risks and opportunities — both physical risks (floods, heat, water stress) and transition risks (carbon prices, policy, technology, demand shifts).
- Climate resilience — an assessment of the strategy's resilience using climate-related scenario analysis, proportionate to the company's circumstances.
- Transition plan — information about any climate-related transition plan, including key assumptions and dependencies.
- Cross-industry metrics — absolute gross Scope 1, Scope 2 and Scope 3 emissions measured under the GHG Protocol Corporate Standard; the amount and percentage of assets or activities vulnerable to transition and physical risks; those aligned with climate opportunities; capital deployed towards climate risks and opportunities; any internal carbon price; and the share of executive pay linked to climate.
- Industry-based metrics — drawn from the SASB-based industry guidance.
- Targets — any climate targets set by the company or required by law, with the progress made.
Scope 2 must be reported on a location-based basis, with information about any contractual instruments needed to understand it. Read more in our explainer on location-based vs market-based Scope 2.
Scope 3 and financed emissions in IFRS S2
Scope 3 is where most of the work lies. IFRS S2 requires companies to disclose Scope 3 emissions and the categories included, using the 15 categories of the GHG Protocol Scope 3 Standard. It accepts that much of the data will be estimated, and sets out a measurement framework that favours direct measurement, data from the specific activity, timely data and verified data. Companies must explain the inputs and assumptions they used.
For banks, asset managers and insurers, IFRS S2 asks for additional information on Category 15 (investments), known as financed emissions: absolute emissions by industry and asset class, the gross exposure covered and the method used.
The December 2025 amendments
In December 2025 the ISSB issued targeted amendments to the greenhouse gas requirements in IFRS S2. They take effect for annual periods beginning on or after 1 January 2027, with early application permitted:
- Financial institutions may limit Category 15 to financed emissions and exclude emissions from derivatives and certain other financial activities, provided they explain what was left out.
- Industry breakdowns of financed emissions no longer have to use GICS if another classification gives more useful information.
- Where a jurisdiction requires a different measurement method or different global warming potential values for all or part of a company, that jurisdictional relief can be used.
Our PCAF guide to financed emissions covers the calculation itself.
Transition reliefs in the first year
Both standards include reliefs for a company's first annual reporting period under them:
| Relief | What it allows |
|---|---|
| Climate first | Report only on climate-related risks and opportunities in year one (with IFRS S1 applied to climate only) |
| Timing | Publish sustainability disclosures after the financial statements, alongside the next half-year report |
| Comparatives | No comparative information required in year one |
| Scope 3 | No Scope 3 disclosure required in year one |
| Measurement method | Keep using a method other than the GHG Protocol if it was used before |
Jurisdictions often extend or change these reliefs. The UK's final standards, for example, removed the time limit on the Scope 3 relief.
ISSB adoption: where IFRS S1 and S2 apply
The IFRS Foundation tracks adoption through published jurisdictional profiles, and in mid-2026 counted dozens of jurisdictions using the standards in some form. Approaches range from full adoption to climate-only versions and local standards built on IFRS S2. A selection, as verified in October 2026:
| Jurisdiction | Approach and timing |
|---|---|
| Singapore | Listed companies report Scope 1 and 2 from FY2025. Straits Times Index constituents also make ISSB-based climate disclosures from FY2025 and report Scope 3 from FY2026; other listed companies follow from FY2028 or FY2030 depending on size (timelines revised in August 2025) |
| Australia | Mandatory climate reporting under AASB S2 (based on IFRS S2), phased in by size from periods starting 1 January 2025, 1 July 2026 and 1 July 2027; Scope 3 from the second reporting year |
| Hong Kong | HKEX climate requirements based on IFRS S2 apply from 1 January 2025, mandatory for large-cap issuers from 1 January 2026; roadmap to full ISSB adoption for large publicly accountable entities no later than 2028 |
| Japan | SSBJ standards (aligned with ISSB) to be phased in for Prime Market companies by market capitalisation, starting with the largest for fiscal years ending March 2027 |
| United Kingdom | UK SRS S1 and S2 issued in February 2026 for voluntary use; mandatory requirements to be set separately |
Timelines move often, so confirm the current rule with your regulator. In India, listed companies report under SEBI's BRSR framework rather than IFRS S1 and S2; see our BRSR Core guide.
Adoption is not uniform. A local standard "based on" IFRS S2 may differ on reliefs, timing, assurance and Scope 3. Report against the version your regulator has adopted.
How to prepare for IFRS S2
- Find your trigger — identify which jurisdiction, exchange or lender will require ISSB-based reporting, and from which year.
- Get Scope 1 and 2 audit-ready first — complete boundaries, evidence for every entry and versioned emission factors.
- Screen Scope 3 — estimate all 15 categories, then improve data for the largest ones.
- Run a climate risk assessment — physical and transition risks, with at least qualitative scenario analysis.
- Connect to finance — link risks to line items, capital plans and the same reporting period.
- Plan for assurance — most regulators phase in limited assurance on emissions early.
How EKOTRACE helps
EKOTRACE builds GHG Protocol and ISO 14064-1 inventories across Scope 1, 2 and all 15 Scope 3 categories, with location- and market-based Scope 2, versioned emission factors and maker-checker approvals with evidence attached. Its ESG reporting module maps the same approved data to ISSB/IFRS S1-S2, ESRS, GRI, BRSR and CDP, so one dataset feeds every framework. See ESG reporting and GHG accounting.
For banks, asset managers and insurers, EKOFIN calculates financed emissions across PCAF asset classes with data quality scores, WACI and sector breakdowns, producing IFRS S2-ready outputs. See financed emissions.
Frequently asked questions
What is the difference between IFRS S1 and IFRS S2?
IFRS S1 sets the general requirements for disclosing all material sustainability-related risks and opportunities. IFRS S2 sets the specific requirements for climate, including emissions, scenario analysis and transition plans. They are designed to be applied together.
Are the ISSB standards mandatory?
Not by themselves. The ISSB issues the standards, but they become mandatory only when a jurisdiction adopts them in law or listing rules. Companies can also apply them voluntarily.
Does IFRS S2 require Scope 3 emissions?
Yes. IFRS S2 requires Scope 3 emissions across the relevant GHG Protocol categories, although companies get relief from Scope 3 in their first year of reporting. Some jurisdictions extend this relief or make Scope 3 voluntary for certain companies.
Is IFRS S2 the same as TCFD?
IFRS S2 builds on the TCFD recommendations and uses the same four pillars, but it is more detailed. It requires specific metrics, Scope 3 emissions and industry-based disclosures. The TCFD has handed its monitoring role to the ISSB.
Can one dataset serve both ISSB and ESRS reporting?
Largely yes. The ISSB and EFRAG have worked on interoperability, and climate metrics overlap heavily. The main difference is that ESRS also requires impact materiality, so it needs more information.