The International Sustainability Standards Board (ISSB) has announced a series of amendments to its IFRS S2 climate-related reporting standard, easing greenhouse gas (GHG) disclosure rules for banks, insurers and other financial institutions.
The move is designed to remove barriers that companies encountered as they began implementing the standard, while still preserving decision-useful information for investors, claims ESG Today.
Unveiled by the IFRS Foundation, the changes respond to feedback gathered during a consultation earlier this year. Since its launch at COP26 in 2021, the ISSB has been working to build a global baseline for sustainability disclosures, releasing IFRS S1 and IFRS S2 in June 2023.
With around 40 jurisdictions already progressing toward adoption, the latest amendments aim to smooth implementation and bring clarity to some of the most complex aspects of climate reporting.
A major update focuses on Scope 3 category 15 emissions, which capture value chain emissions linked to investments and financing activities. Financial firms had raised concerns about the breadth of disclosures required under the initial rules. The ISSB now states that institutions may limit their reporting to emissions directly attributed to loans and investments.
For asset managers, this means disclosures tied to assets under management. Crucially, the update confirms that facilitated emissions from investment banking or capital markets activities, and insurance-associated emissions from underwriting, do not need to be included. Firms may also exclude emissions connected to derivatives from their financed emissions calculations.
The amendments introduce additional reliefs for banking and insurance entities, clarifying that they are not required to use the Global Industry Classification Standard (GICS) when disclosing disaggregated financed emissions data. Alternative classification systems may be used instead. The ISSB also confirmed that companies can rely on jurisdiction-mandated Global Warming Potential (GWP) values, even if these differ from the latest IPCC assessment, and highlighted flexibility in using measurement methodologies other than the Greenhouse Gas Protocol where local authorities permit.
ISSB vice-chair Sue Lloyd said, “Our priority in delivering targeted amendments to IFRS S2 GHG emissions disclosure requirements has been to provide a timely response to challenges. 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.”
The updated guidance marks one of the most significant clarifications to IFRS S2 since its introduction and is likely to be welcomed by financial firms preparing their first mandatory ISSB-aligned disclosures. By narrowing the scope of reporting requirements and offering jurisdictional flexibility, the ISSB aims to accelerate global adoption while maintaining robust transparency over firms’ climate-related impacts.
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