IFRS S2 hands you a real advantage that is easy to miss: freedom in how you present a climate disclosure. The standard is clear about what to disclose, then leaves the layout, and much of the placement, up to you. There is no template to fill in section by section, so you can shape the disclosure to fit the report you already publish.
For a physical climate risk disclosure, that turns into a specific problem. The numbers that prove your physical risk are not in one place. They are spread across different parts of the standard, they can land in different parts of your report, and they reach back into your financial statements. The real structural task is not formatting. It is making that scattered set of numbers easy for a reader, and an auditor, to follow.
This piece walks the structure of an IFRS S2 disclosure through the physical-risk lens: where the physical-risk numbers live, why they are split up, and how to keep them traceable.
- IFRS S2 lets you shape your own report. It tells you what to disclose, not how to lay it out, so there is no template to fill in section by section.
- For physical risk, the proof is split on purpose. Scenario analysis sits in one part of the standard (Strategy); the two physical-risk figures sit in another (Metrics and Targets).
- You choose where each piece goes, and you can even link to a separate report. But whoever signs the report still owns every figure, wherever it sits.
- The cheap fix is a map: a short index that says where each required item lives. It turns a scattered disclosure into one an auditor can follow in minutes.
The standard hands you no template
IFRS S2 sorts its requirements into four groups: Governance, Strategy, Risk Management, and Metrics and Targets. It is easy to read those four headings as a mandatory report structure. They are not.
The standard’s own explanation says so. The Basis for Conclusions, the document where the board sets out the reasoning behind each decision, puts it plainly:
This core content is aligned with the structure of the widely accepted TCFD recommendations and reflects how entities oversee and manage sustainability-related risks and opportunities… For the avoidance of doubt, IFRS S2 does not prescribe how entities should manage their businesses.
In plain terms: the four groups are a checklist of topics to cover, borrowed from an earlier framework (the Task Force on Climate-related Financial Disclosures, the model most climate reporting was built on before IFRS S2). They are not a blueprint for how your report has to look.
So the first thing to drop is the idea that there is one correct format. There is not.
Where the disclosure can physically live
The rules on where the disclosure goes are not in IFRS S2 at all. They sit in IFRS S1, the general-requirements standard that IFRS S2 is applied under.
IFRS S1 starts with one firm rule, in its paragraph 60:
An entity is required to provide disclosures required by IFRS Sustainability Disclosure Standards as part of its general purpose financial reports.
In plain terms: the disclosure has to live inside the reports that investors and lenders rely on to make decisions, which means your annual report and the statements that go with it. It cannot be a stand-alone marketing document off to the side.
After that, the latitude is wide. Paragraph 61 lists several acceptable homes: management commentary, a “management’s discussion and analysis,” an “operating and financial review,” an “integrated report,” or a “strategic report.” Paragraph 63 goes further and lets you point to another published report by cross-reference instead of repeating the information.
In plain terms: you get to choose where, within your reporting, each piece of the climate disclosure sits, and you can even park some of it in a separate report and link to it.
The physical-risk numbers are scattered across two areas by design
That freedom matters most for physical risk, because the physical-risk story is split across the standard on purpose.
Scenario analysis, the work of testing your business against different future climate paths, lives in paragraph 22, inside the Strategy group. The two physical-risk figures sit somewhere else entirely, in the Metrics and Targets group: paragraph 29(c) asks for
the amount and percentage of assets or business activities vulnerable to climate-related physical risks,
and paragraph 29(e) asks for the capital you put toward responding to climate risk:
the amount of capital expenditure, financing or investment deployed towards climate-related risks and opportunities.
In plain terms: the percentage of your assets exposed to floods, heat, storms and the like is reported in one area, the money you spend hardening those assets in the same area, and the scenarios you tested them against in a different area. On top of that, the 29(c) figure is meant to connect back to your financial statements, because the asset values it rests on come from the same books. We covered that connection in our piece on the application guidance behind paragraph 29(c).
(This walkthrough stays on the physical-risk numbers. The emissions, transition-risk and opportunity parts of paragraph 29, and the governance and risk-management narrative, follow the same structural rules but sit outside this piece.)
So a single physical-risk disclosure draws on at least two separate parts of the standard, lands in at least two parts of your report, and reaches into your accounts. Nobody told you to put it in one neat section, and the standard does not expect you to.
That freedom is also a risk, and the fix is a map
Spreading the disclosure around is allowed. It also creates a traceability problem: a reader, and the auditor, has to be able to follow each required item to the exact place you disclosed it.
The cross-reference rules make the stakes clear. When paragraph 63 lets you point to another report, it sends you to the application guidance in paragraphs B45 and B46. B45 sets conditions: the information you point to has to be “available on the same terms and at the same time” as the rest of the disclosure, and the disclosure must not be made “less understandable” by the cross-reference. B46 is the one that matters most:
Information included by cross-reference becomes part of the complete set of sustainability-related financial disclosures… The body(s) or individual(s) that authorises the general purpose financial reports takes the same responsibility for the information included by cross-reference as it does for the information included directly.
In plain terms: pointing to a number somewhere else does not lower the bar. Whoever signs the report owns that figure exactly as if it were printed on the front page. IFRS S1 also asks you to keep the pieces connected, using clear cross-references and the same figures, assumptions and units throughout.
The cheap fix for all of this is a map: a short index that lists each paragraph of the standard and says where its disclosure sits in your report. We publish one as a model. Our paragraph-by-paragraph reading of IFRS S2 lays out every disclosure paragraph under its group, with the standard’s own text beneath each one, so you can see the shape at a glance: scenario analysis under Strategy, the two physical-risk figures under Metrics and Targets.
A preparer’s own version of that map only needs to add one column, the page where each item actually sits. For the physical-risk paragraphs, a real estate company’s map might read:
| What the standard asks for | Where IFRS S2 files it | Where we disclosed it |
|---|---|---|
| Scenario analysis: how the business holds up under different climate futures (paragraph 22) | Strategy | Annual report, climate section, pages 40 to 42 |
| Amount and percentage of assets exposed to physical hazards (paragraph 29(c)) | Metrics and Targets | Annual report, climate metrics table, page 58 |
| Money spent responding to climate risk (paragraph 29(e)) | Metrics and Targets | Annual report, climate metrics table, page 59 |
| The asset values the 29(c) percentage is measured against | Financial statements | Notes to the accounts, property note, page 96 |
Four lines like these do the whole job. They show a reader that nothing required was skipped, and they show exactly where to look. The disclosure can be spread across forty pages and three sections, and it still reads as one connected set. That is the difference between a disclosure an auditor has to hunt through and one they can follow in minutes.
Two honest limits. A map fixes your own report; it does not make two companies’ reports comparable, because the standard lets everyone lay things out differently, so a reader still has to learn each report. And a map is not required. The standard does not ask for one. It is good practice, not a rule. Year-one reviews have mostly checked that a process exists rather than testing every number, but the responsibility rule in B46 points to where the scrutiny goes next.
The takeaway is to treat structure the way you treat any risk figure you have to defend. The number is only as good as your ability to show where it came from. For physical risk, that means the asset-level exposure data behind the 29(c) figure, and the asset values that give it a total to measure against, both have to trace back to a clear source. Structure is what makes that trace possible.
Report structure is one of several things tightening for the 2026 reporting cycle. For the full set, see our roundup of five IFRS S2 disclosure priorities for 2026.
Sources
- IFRS S2 Climate-related Disclosures, paragraphs 22, 29(c), 29(e).
- IFRS S2 Basis for Conclusions (the structure of the four content areas; alignment with the TCFD recommendations).
- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, paragraphs 60, 61, 63 (location of disclosures) and B45, B46 (information included by cross-reference); paragraph 21 (connected information).
- Continuuiti, IFRS S2 standard text read paragraph by paragraph: /disclosures/ifrs-s2/standard-text/
Worked Samples
See What a Finished IFRS S2 Disclosure Looks Like
A full worked disclosure, paragraph by paragraph, showing where each required item sits. The clearest way to see the structure described here in practice.
Frequently asked questions
Does IFRS S2 give you a report template or a required format?
No. IFRS S2 tells you what to disclose, not how to lay out your report. Its four groups, Governance, Strategy, Risk Management, and Metrics and Targets, are a checklist of topics borrowed from the earlier TCFD recommendations, not a required section order. The standard’s own Basis for Conclusions says it does not prescribe how entities run their businesses.
Where in your report does an IFRS S2 climate disclosure have to go?
Inside your general purpose financial reports, the ones investors and lenders rely on, such as your annual report. That rule comes from IFRS S1, paragraph 60. Paragraph 61 then lets you place it in management commentary, an operating and financial review, an integrated report, or a strategic report. It cannot be a stand-alone document off to the side.
Can you put part of the IFRS S2 disclosure in a separate report and link to it?
Yes. IFRS S1 paragraph 63 lets you point to information in another report by cross-reference instead of repeating it, as long as that information is available on the same terms and at the same time. But paragraph B46 is clear that this does not lower the bar: whoever signs the report takes the same responsibility for a cross-referenced figure as for one printed directly in it.
Why are the physical-risk numbers split across different parts of IFRS S2?
By design. Scenario analysis sits in paragraph 22, inside the Strategy group. The two physical-risk figures sit in the Metrics and Targets group: paragraph 29(c), the amount and percentage of assets exposed to physical hazards, and paragraph 29(e), the money spent responding to climate risk. The 29(c) figure also connects back to the asset values in your financial statements.
