IFRS S2 — Climate-related
Disclosures
Development Stages of IFRS S2
Date Development Comments
March 2021 Technical Readiness Working Group (TRWG) created
November Climate-related financial information prototype published
2021
31 March ED/2022/S2 Climate-Related Disclosure published Comments requested by 29
2022 July 2022
26 June 2023 IFRS S2 Climate-related Disclosures published Applies to annual reporting
periods beginning on or after
1 January 2024
Source: IAS Plus and IFRS Website
Objectives of IFRS S2
The objective of IFRS S2 Climate-related Disclosures is to require an
entity to disclose information about its climate-related risks and
opportunities that is useful to primary users of general purpose financial
reports in making decisions relating to providing resources to the entity.
This Standard requires an entity to disclose information about climate-
related risks and opportunities that could reasonably be expected to affect
the entity’s cash flows, its access to finance or cost of capital over the
short, medium or long term.
For the purposes of this Standard, these risks and opportunities are
collectively referred to as ‘climate-related risks and opportunities that
could reasonably be expected to affect the entity’s prospects’
Scope of IFRS S2
This Standard applies to:
a) climate-related risks to which the entity is exposed, which are:
i) climate-related physical risks; and
ii) climate-related transition risks; and
b)climate-related opportunities available to the entity.
Climate-related risks and opportunities that could not reasonably
be expected to affect an entity’s prospects are outside the scope of
this Standard.
Scope of IFRS S2
Climate-Related Physical Risks
Climate-Related Transition Risks
Climate-Related Opportunities
Core Contents
Risk Metrics and
Governance Strategy
Management Target
1.0 Governance
The objective of climate-related financial disclosures on
governance is to enable users of general purpose financial
reports to understand the governance processes, controls and
procedures an entity uses to monitor, manage and oversee
climate-related risks and opportunities.
1.0 Governance…………
Here to achieve the above objectives entity required to disclose information
about:
(a) The governance body(s) (which can include a board, committee or
equivalent body charged with governance) or individual(s) responsible for
oversight of climate-related risks and opportunities. Specifically, the entity
shall identify that body(s) or individual(s) and disclose information about:
💡how responsibilities for climate-related risks and opportunities are
reflected in the terms of reference, mandates, role descriptions and other
related policies applicable to that body(s) or individual(s);
💡how the body(s) or individual(s) determines whether appropriate skills
and competencies are available or will be developed to oversee strategies
designed to respond to climate-related risks and opportunities;
1.0 Governance…………
💡how and how often the body(s) or individual(s) is informed
about climate-related risks and opportunities;
💡how the body(s) or individual(s) takes into account climate-
related risks and opportunities when overseeing the entity’s
strategy, its decisions on major transactions and its risk
management processes and related policies, including whether
the body(s) or individual(s) has considered trade-offs associated
with those risks and opportunities; and
💡how the body(s) or individual(s) oversees the setting of targets
related to climate-related risks and opportunities, and monitors
progress towards those targets
1.0 Governance…………
(b) management’s role in the governance processes, controls and procedures
used to monitor, manage and oversee climate-related risks and
opportunities, including information about:
💡whether the role is delegated to a specific management-level position or
management-level committee and how oversight is exercised over that
position or committee; and
💡whether management uses controls and procedures to support the
oversight of climate-related risks and opportunities and, if so, how these
controls and procedures are integrated with other internal functions.
2.0 Strategy
The objective of climate-related financial disclosures on
strategy is to enable users of general purpose financial reports
to understand an entity’s strategy for managing climate-
related risks and opportunities.
2.0 Strategy……………..
An entity shall disclose information to enable users of general purpose financial reports
to understand:
🔎 the climate-related risks and opportunities that could reasonably be expected to affect
the entity’s prospects
🔎 the current and anticipated effects of those climate-related risks and opportunities on
the entity’s business model and value chain
🔎 the effects of those climate-related risks and opportunities on the entity’s strategy and
decision-making including information about climate transitional plan
🔎 the effects of those climate-related risks and opportunities on the entity’s financial
position, financial performance and cash flows for the reporting period, and their
anticipated effects on the entity’s financial position, financial performance and cash
flows over the short, medium and long term, taking into consideration how those
climate-related risks and opportunities have been factored into the entityʼs financial
planning
🔎 the climate resilience of the entity’s strategy and its business model to climate-related
changes, developments and uncertainties, taking into consideration the entity’s
identified climate-related risks and opportunities
2.1 climate-related risks and opportunities
• An entity shall disclose information that enables users of general purpose financial
reports to understand the climate-related risks and opportunities that could reasonably
be expected to affect the entity’s prospects. Specifically, the entity shall:
• describe climate-related risks and opportunities that could reasonably be expected to
affect the entity’s prospects;
• explain, for each climate-related risk the entity has identified, whether the entity
considers the risk to be a climate-related physical risk or climate-related transition risk;
• specify, for each climate-related risk and opportunity the entity has identified, over
which time horizons—short, medium or long term—the effects of each climate-related
risk and opportunity could reasonably be expected to occur; and
• explain how the entity defines ‘short term’, ‘medium term’ and ‘long term’ and how
these definitions are linked to the planning horizons used by the entity for strategic
decision-making.
2.2 Business model and value chain
An entity shall disclose information that enables users of general purpose
financial reports to understand the current and anticipated effects of
climate-related risks and opportunities on the entity’s business model
and value chain. Specifically, the entity shall disclose:
• a description of the current and anticipated effects of climate-related
risks and opportunities on the entity’s business model and value chain;
and
• a description of where in the entity’s business model and value chain
climate-related risks and opportunities are concentrated (for example,
geographical areas, facilities and types of assets).
2.3 Strategy and decision-making
An entity shall disclose information that enables users of general purpose
financial reports to understand the effects of climate-related risks and
opportunities on its strategy and decision-making. Specifically, the entity shall
disclose information about:
a) information about how the entity has responded to, and plans to respond
to, climate-related risks and opportunities in its strategy and decision-
making, including how the entity plans to achieve any climate-related
targets it has set and any targets it is required to meet by law or regulation.
Specifically, the entity shall disclose information about:
i) current and anticipated changes to the entity’s business model
ii) current and anticipated direct mitigation and adaptation efforts
2.3 Strategy and decision-making……
i) current and anticipated indirect mitigation and adaptation efforts
ii) any climate-related transition plan the entity has
iii) how the entity plans to achieve any climate-related targets (including
GHG emissions)
b) information about how the entity is resourcing, and plans to resource,
the activities disclosed
c) quantitative and qualitative information about the progress of plans
disclosed in previous reporting periods
2.4 financial position, financial performance and cash
flows
An entity shall disclose information that enables users of general purpose financial reports to
understand:
a) the effects of climate-related risks and opportunities on the entity’s financial position,
financial performance and cash flows for the reporting period (current financial effects); and
b) the anticipated effects of climate-related risks and opportunities on the entity’s financial
position, financial performance and cash flows over the short, medium and long term, taking
into consideration how climate-related risks and opportunities are included in the entity’s
financial planning (anticipated financial effects).
• entity shall disclose quantitative and qualitative information
• In providing quantitative information, an entity may disclose a single amount or a range.
Cost and Expertise
In preparing disclosures about the anticipated financial effects of a
climate-related risk or opportunity, an entity shall:
a) use all reasonable and supportable information that is available to the
entity at the reporting date without undue cost or effort
b) use an approach that is commensurate with the skills, capabilities and
resources that are available to the entity for preparing those disclosures.
Exemption from quantitative information
An entity need not provide quantitative information about the current or anticipated
financial effects of a climate-related risk or opportunity if the entity determines that:
• those effects are not separately identifiable; or
• the level of measurement uncertainty involved in estimating those effects is so high
that the resulting quantitative information would not be useful
• An entity need not provide quantitative information about the anticipated financial
effects of a climate-related risk or opportunity if the entity does not have the skills,
capabilities or resources to provide that quantitative information.
2.5 Climate Resilience
An entity shall disclose information that enables users of general purpose
financial reports to understand the resilience of the entity’s strategy and
business model to climate-related changes, developments and
uncertainties, taking into consideration the entity’s identified climate-
related risks and opportunities. The entity shall use climate-related
scenario analysis to assess its climate resilience using an approach that is
commensurate with the entity’s circumstances. In providing quantitative
information, the entity may disclose a single amount or a range.
Specifically, the entity shall disclose:
2.6 Climate Resilience……….
a) the entity’s assessment of its climate resilience as at the reporting date, which
shall enable users of general purpose financial reports to understand:
i) the implications, if any, of the entity’s assessment for its strategy and
business model, including how the entity would need to respond to the
effects identified in the climate-related scenario analysis;
ii) the significant areas of uncertainty considered in the entity’s assessment of
its climate resilience;
iii) the entity’s capacity to adjust or adapt its strategy and business model to
climate change over the short, medium and long term
how and when the climate-related scenario analysis was carried out including:
i) information about the inputs the entity used
ii) the key assumptions the entity made in the analysis, including assumptions.
iii) the reporting period in which the climate-related scenario analysis was
carried out
3.0 Risk management
The objective of climate-related financial disclosures on risk management
is to enable users of general purpose financial reports to understand an
entity’s processes to identify, assess, prioritise and monitor climate-
related risks and opportunities, including whether and how those
processes are integrated into and inform the entity’s overall risk
management process.
3.0 Risk management……………..
Here the disclosure required are:
a) the processes and related policies the entity uses to identify, assess,
prioritise and monitor climate-related risks, including information about:
i) the inputs and parameters the entity uses (for example, information
about data sources and the scope of operations covered in the
processes);
ii) whether and how the entity uses climate-related scenario analysis to
inform its identification of climate-related risks;
iii) how the entity assesses the nature, likelihood and magnitude of the
effects of those risks (for example, whether the entity considers
qualitative factors, quantitative thresholds or other criteria);
3.0 Risk management……………..
iv) whether and how the entity prioritises climate-related risks relative to other types of
risk;
v) how the entity monitors climate-related risks; and
vi) whether and how the entity has changed the processes it uses compared with the
previous reporting period;
b) the processes the entity uses to identify, assess, prioritise and monitor climate-related
opportunities, including information about whether and how the entity uses climate-
related scenario analysis to inform its identification of climate-related opportunities; and
c) the extent to which, and how, the processes for identifying, assessing, prioritising and
monitoring climate-related risks and opportunities are integrated into and inform the
entity’s overall risk management process.
4.0 Metrics and targets
The objective of climate-related financial disclosures on metrics
and targets is to enable users of general purpose financial
reports to understand an entity’s performance in relation to its
climate-related risks and opportunities, including progress
towards any climate-related targets it has set, and any targets it
is required to meet by law or regulation.
4.0 Metrics and targets……….
To achieve this objective, an entity shall disclose:
a) information relevant to the cross-industry metric categories
b) Industry-based metrics that are associated with particular business
models, activities or other common features that characterise
participation in an industry
c) targets set by the entity, and any targets it is required to meet by
law or regulation, to mitigate or adapt to climate-related risks or take
advantage of climate-related opportunities, including metrics used by
the governance body or management to measure progress towards
these targets
4.0 Metrics and targets……
Climate Related Metrics
An entity shall disclose information relevant to the cross-industry metric
categories of:
a) greenhouse gases
b) climate-related transition risks—the amount and percentage of assets
or business activities vulnerable to climate-related transition risks;
c) climate-related physical risks—the amount and percentage of assets or
business activities vulnerable to climate-related physical risks;
d) climate-related opportunities—the amount and percentage of assets or
business activities aligned with climate-related opportunities;
4.0 Metrics and targets……
Climate Related Metrics…….
e) capital deployment—the amount of capital expenditure, financing or
investment deployed towards climate-related risks and opportunities;
f) internal carbon prices
g) remuneration
4.0 Metrics and targets……
Climate Related Targets
An entity shall disclose the quantitative and qualitative climate-related
targets it has set to monitor progress towards achieving its strategic
goals, and any targets it is required to meet by law or regulation,
including any greenhouse gas emissions targets. For each target, the
entity shall disclose:
a) the metric used to set the target
b) the objective of the target (for example, mitigation, adaptation or
conformance with science-based initiatives);
4.0 Metrics and targets……
Climate Related Targets…..
c) the part of the entity to which the target applies (for example, whether the target
applies to the entity in its entirety or only a part of the entity, such as a specific business
unit or specific geographical region);
d) the period over which the target applies;
e) the base period from which progress is measured;
f) any milestones and interim targets;
g) if the target is quantitative, whether it is an absolute target or an intensity target; and
h) how the latest international agreement on climate change, including jurisdictional
commitments that arise from that agreement, has informed the target.
4.0 Metrics and targets……
Climate Related Targets………………
An entity shall disclose information about its approach to setting and reviewing each
target, and how it monitors progress against each target, including:
a) whether the target and the methodology for setting the target has been validated by a
third party;
b) the entity’s processes for reviewing the target;
c) the metrics used to monitor progress towards reaching the target; and
d) any revisions to the target and an explanation for those revisions.
An entity shall disclose information about its performance against each climate-related
target and an analysis of trends or changes in the entity’s performance.
4.0 Metrics and targets……
Climate Related Targets…….
For each greenhouse gas emissions target an entity shall disclose:
a) which greenhouse gases are covered by the target.
b) whether Scope 1, 2 or 3 greenhouse gas emissions are covered by the target.
c) whether the target is a gross or net greenhouse gas emissions target. If the entity discloses
a net greenhouse gas emissions target, the entity is also required to separately disclose its
associated gross greenhouse gas emissions target
d) whether the target was derived using a sectoral decarbonisation approach
e) the entity’s planned use of carbon credits to offset greenhouse gas emissions to achieve
any net greenhouse gas emissions target.
In identifying and disclosing the metrics used to set and monitor progress towards reaching
a target described, an entity shall refer to and consider the applicability of cross-industry
metrics and industry-based metrics, including those described in an applicable IFRS
Sustainability Disclosure Standard, or metrics that otherwise satisfy the requirements in
IFRS S1
Q & A???
