ISSB Updates Climate Disclosure Standard to Address Early Implementation Challenges

Key Takeaways

• Targeted IFRS S2 Amendments Issued: The ISSB has made narrow changes to IFRS S2 focused on greenhouse gas emissions disclosures, responding to implementation challenges flagged by companies.
• Scope 3 Clarification on Financed Emissions: Companies may limit Scope 3 Category 15 disclosures to financed emissions as defined in IFRS S2, reducing complexity in one of the most challenging reporting areas.
• Greater Flexibility in Classification and Measurement: The amendments allow alternative industry classification systems and clarify jurisdictional relief where different GHG measurement methods apply.
• Jurisdictional Relief on Global Warming Potentials: Entities may use alternatives to the latest IPCC global warming potential values where required by local rules.

Deep Dive

The International Sustainability Standards Board released targeted amendments to its IFRS S2 Climate-related Disclosures standard, responding to practical challenges companies have encountered as they begin putting the new climate rules into practice.

The changes focus squarely on greenhouse gas emissions disclosures and are intended to provide relief where implementation has proven particularly complex, without undermining the usefulness of the information for investors or reopening the substance of the standard. The amendments follow a consultation held earlier this year and input from market participants, including members of the ISSB’s Transition Implementation Group.

According to the ISSB, the aim was to address real-world friction points while keeping jurisdictions on track that are already in the process of adopting or aligning with ISSB standards.

“Our priority in delivering targeted amendments to IFRS S2 GHG emissions disclosure requirements has been to provide a timely response to challenges,” ISSB Vice-Chair Sue Lloyd said. “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.”

Narrowing and Clarifying Scope 3 Disclosures

One of the most significant changes centers on Scope 3 Category 15 emissions, which cover financed emissions and have emerged as one of the most difficult areas of climate reporting.

Under the amendments, companies are explicitly permitted to limit their measurement and disclosure of Scope 3 Category 15 emissions to financed emissions as defined in IFRS S2. The ISSB said this clarification is designed to reduce ambiguity and avoid over-extension in areas where data availability and methodological consistency remain uneven.

The amendments also allow entities to use alternative industry classification systems, rather than relying solely on the Global Industry Classification Standard, when breaking down financed emissions. This flexibility is intended to better reflect how organizations actually manage and analyze their portfolios.

Jurisdictional Reliefs and Measurement Flexibility

The ISSB also addressed concerns from multinational companies operating across multiple regulatory regimes. The amendments clarify that jurisdictional relief from using the Greenhouse Gas Protocol Standard remains available even when only part of an entity is required to apply a different measurement method under local rules.

In addition, the board introduced a new jurisdictional relief from using global warming potential values drawn from the latest Intergovernmental Panel on Climate Change assessment report when converting greenhouse gas emissions, recognizing that some jurisdictions mandate alternative approaches.

Alongside the IFRS S2 changes, the ISSB issued consequential amendments to three SASB Standards to align their financed emissions metrics with the updated IFRS S2 requirements. The move is intended to maintain consistency across the ISSB’s standards suite as companies integrate sustainability disclosures into their broader reporting frameworks.

The amendments will take effect for reporting periods beginning on or after 1 January 2027, with early application permitted. The ISSB said the timing is meant to give preparers certainty while avoiding disruption to ongoing adoption efforts around the world.

Lloyd also thanked stakeholders who contributed feedback throughout the process, noting that engagement from preparers and implementation groups played a key role in shaping the final amendments.

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