The International Sustainability Standards Board (ISSB) has published an Exposure Draft proposing targeted amendments to its IFRS S2 Climate-related Disclosures standard, aiming to ease application challenges faced by companies while maintaining the decision-usefulness of reported information for investors.
The proposed changes are open for public comment until 27 June 2025, marking the first time the ISSB has proposed amendments to IFRS S2 since its launch in June 2023. The move reflects the ISSB’s market-responsive approach to standard-setting, particularly in supporting early-stage implementation.
Focus on Scope 3 Reliefs for Financial Sector
One of the key changes would affect Scope 3 emissions reporting—specifically Category 15 emissions related to investments. Under the draft amendments, financial sector companies would be granted relief from disclosing emissions associated with:
- Derivatives
- Facilitated emissions (such as emissions linked to underwriting or advisory services)
- Insurance-associated emissions
Instead, companies would be permitted to limit Scope 3 reporting to financed emissions. To ensure transparency, the ISSB proposes that companies disclose the magnitude of activities excluded from Scope 3 reporting, including the notional amounts related to derivatives and other exempted financial activities.
This adjustment responds to market feedback about the operational challenges and costs associated with tracking and reporting on complex financial instruments.
Additional Proposed Amendments
Other changes proposed in the Exposure Draft include:
- GICS Relief: Companies engaged in commercial banking or insurance activities would be granted flexibility regarding the use of the Global Industry Classification Standard (GICS) when disclosing disaggregated financed emissions information.
- Jurisdictional GWP Values: Entities would be permitted to use jurisdiction-required Global Warming Potential (GWP) values instead of the latest Intergovernmental Panel on Climate Change (IPCC) metrics when mandated by local regulation.
- Alternative Measurement Methods: Clarifications allowing entities to use measurement methods other than the Greenhouse Gas Protocol for GHG accounting if aligned with jurisdictional requirements.
These measures are designed to reduce reporting duplication, lower compliance costs, and support adoption across multiple jurisdictions, while preserving the ISSB’s ambition to deliver consistent and comparable climate disclosure.
Background: ISSB’s Broader Mission
The ISSB was launched by the IFRS Foundation during the COP26 climate summit in 2021, tasked with developing global sustainability reporting standards to provide investors with transparent, comparable information about sustainability-related risks and opportunities. Since publishing IFRS S1 (General Sustainability) and IFRS S2 (Climate) standards in mid-2023, over 35 jurisdictions have begun the process of adopting or aligning with the ISSB framework.
The current Exposure Draft follows feedback gathered through the Transition Implementation Group for IFRS S1 and S2, jurisdictional dialogues, and broader market consultations.
“It is the role of a responsible standard-setter to listen to market feedback from the earliest implementation stages,” said Sue Lloyd, ISSB Vice-Chair. “We have proposed targeted amendments helping preparers where possible, without causing disruption and while ensuring the continued provision of decision-useful information to investors.”
Next Steps
Stakeholders are encouraged to review and comment on the proposed amendments by 27 June 2025. Following analysis of the feedback, the ISSB plans to finalize the amendments by the end of 2025.
Entities currently reporting under IFRS S1 and S2 as issued in 2023 can continue doing so without interruption. Jurisdictions that have adopted or are aligning their national standards with ISSB guidelines are encouraged to maintain consistency to uphold the “global baseline” envisioned by the IFRS Foundation.
Click here to access the exposure draft and response form.
