Philippine SEC Introduces ISSB-Aligned Sustainability Reporting Requirements

Key Takeaways

• ISSB Alignment: The Philippine SEC has adopted PFRS S1 and S2, aligning sustainability and climate disclosures with global ISSB standards.
• Broader Coverage: Reporting requirements now extend beyond listed companies to large non-listed entities meeting revenue thresholds.
• Tiered Implementation: Mandatory adoption begins in fiscal year 2026 and rolls out in phases based on market capitalization and revenue.
• Climate Assurance Introduced: Limited assurance for Scope 1 and 2 emissions becomes mandatory two years after adoption for each tier.
• Transition Reliefs: Companies are given phased disclosure requirements, extended timelines, and temporary exemptions on Scope 3 and comparative data.

Deep Dive

The Philippines' Securities and Exchange Commission recently issued Memorandum Circular No. 16, Series of 2025, adopting the Philippine Financial Reporting Standards on Sustainability Disclosures and setting out new reporting rules for publicly listed companies and large non-listed entities. The circular marks a decisive shift away from the country’s earlier, more limited sustainability reporting framework and brings its sustainability reporting regime into line with global practices.

At the center of the new rules are PFRS S1, which establishes general requirements for sustainability-related financial disclosures, and PFRS S2, which focuses specifically on climate-related risks and opportunities. Together, they replace the SEC’s 2019 sustainability reporting circular, which applied only to listed companies and predated the emergence of the ISSB standards now shaping global disclosure expectations.

The SEC’s move aligns Philippine reporting with the sustainability disclosure standards issued by the International Sustainability Standards Board, which have already been adopted or incorporated into regulatory frameworks across several ASEAN markets.

SEC Chairperson Francis Lim said the adoption reflects the regulator’s push toward more decision-useful sustainability information.

“The adoption of the PFRS on Sustainability Disclosures underscore our commitment to high-quality, comparable, and globally aligned sustainability reporting,” Lim said. “By elevating the standards of sustainability reporting in the Philippines, we hope to enable more companies and stakeholders to better understand the financial impacts of sustainability-related risks and opportunities, supporting long-term value creation and improved capital allocation decisions.”

Who Must Report and What Changes

Under the new framework, publicly listed companies and large non-listed entities covered by Section 17.2 of the Securities Regulation Code must submit sustainability reports that have been reviewed and approved by their boards of directors. These reports will be filed as attachments to annual reports.

Large non-listed entities that fall outside that provision are still required to prepare sustainability reports, but must submit them alongside their audited financial statements instead.

The new circular also broadens the scope of mandatory reporting beyond publicly listed firms, reflecting a wider regulatory push to capture sustainability risks across economically significant companies, regardless of listing status.

Tiered Implementation Beginning in 2026

Mandatory adoption of PFRS S1 and PFRS S2 will follow a phased, tiered rollout starting with fiscal year 2026.

Tier 1 applies to publicly listed companies with a market capitalization above approximately $890 million (PHP 50 billion) as of December 31, 2025, or at the date of listing thereafter. These companies will begin reporting in 2027, covering fiscal year 2026.

Tier 2 covers listed companies with market capitalization above approximately $54 million (PHP 3 billion) and up to approximately $890 million (PHP 50 billion) as of the same date. These firms must apply the standards to fiscal years beginning on or after January 1, 2027, with reports due in 2028.

Tier 3 includes listed companies with market capitalization of approximately $54 million (PHP 3 billion) or less, companies with debt securities listed solely on the Philippine Dealing & Exchange Corp. and no equity listings on the Philippine Stock Exchange, and large non-listed entities with annual revenues exceeding approximately $268 million (PHP 15 billion) in the immediately preceding fiscal year. For this group, adoption begins in 2028.

For parent companies, revenue thresholds will be assessed at the consolidated or group level rather than on a standalone basis.

Climate Assurance and Use of Other Frameworks

Beyond disclosure requirements, the new rules introduce mandatory limited assurance for Scope 1 and Scope 2 greenhouse gas emissions. Independent assurance will become mandatory two years after each tier begins applying PFRS S1 and S2, in line with International Standard on Sustainability Assurance 5000.

The SEC has also left room for flexibility. Covered companies may continue to use other international sustainability frameworks alongside PFRS S1 and S2, provided those frameworks do not conflict with the Philippine standards, obscure material information, or create confusion for users of the reports.

Recognizing the scale of the change, the SEC has built in a series of transitional reliefs. The 2019 sustainability reporting circular will remain in effect until a company reaches its designated adoption year. Companies may also continue using any recognized sustainability framework for fiscal year 2025.

Tier 1 and Tier 2 companies will be allowed to disclose only climate-related risks and opportunities for one year, while Tier 3 companies are granted a two-year transition period. All covered entities will have up to one year after publishing their financial statements to submit sustainability reports, either alongside interim financial disclosures or within nine months of the reporting period’s end if no interim statements are issued.

During the transition, companies will not be required to provide comparative information, may use greenhouse gas measurement methods other than the GHG Protocol for one year, and will not be required to disclose Scope 3 emissions for two years.

Rather than treating sustainability reporting as a standalone narrative exercise, the new rules embed climate and sustainability risks directly into the financial reporting perimeter. For boards and senior management, that shift raises practical questions about data ownership, internal controls, and how sustainability information is reviewed and signed off alongside financial statements.

The phased rollout and transition reliefs offer breathing room, but they also set a clear direction of travel. As limited assurance on greenhouse gas emissions becomes mandatory and ISSB-aligned disclosures become the baseline, Philippine regulators are signaling that sustainability reporting is moving from voluntary storytelling toward regulated, decision-useful information that investors can rely on.

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