IFRS S1 and S2: What They Require and Who Must Comply

Companies face a growing web of sustainability disclosure frameworks. Among them, IFRS S1 and S2 have emerged as the most widely adopted global baseline. Issued in June 2023 by the International Sustainability Standards Board (ISSB), these two standards have now been adopted or referenced by more than 30 jurisdictions worldwide. IFRS S1 covers general sustainability-related financial disclosures, while IFRS S2 focuses specifically on climate. Together, they replace the TCFD recommendations and create a single, investor-focused reporting framework. Here is what they require, how they differ, and who must comply.

What Is IFRS S1 and S2?

Standard	Purpose
IFRS S1	General Requirements for Disclosure of Sustainability-related Financial Information
IFRS S2	Climate-related Disclosures

IFRS S1 sets the foundation. It requires companies to disclose all sustainability-related risks and opportunities that could reasonably affect their cash flows, access to finance, or cost of capital. The standard does not specify which sustainability topics to cover. Instead, it points companies to SASB Standards and the CDSB Framework as guidance for identifying material topics by industry.

IFRS S2 narrows the lens to climate. It requires specific disclosures about physical risks, transition risks, climate-related opportunities, greenhouse gas emissions, and scenario analysis. The standard draws heavily from the TCFD recommendations and integrates industry-specific metrics from SASB.

The ISSB was established at COP26 in November 2021 under the IFRS Foundation. Over the following two years, it consolidated several existing sustainability disclosure bodies: CDSB integrated in January 2022, the Value Reporting Foundation (which had absorbed SASB) consolidated in August 2022, and the IFRS Foundation took over the TCFD’s monitoring role from 2024 after the task force completed its work in October 2023. After 18 months of public consultation, the board issued both standards on 26 June 2023. One month later, the International Organization of Securities Commissions (IOSCO) endorsed IFRS S1 and S2 and called on its 130 member jurisdictions to adopt them.

A critical design feature: any entity applying IFRS S2 must also apply IFRS S1. The climate standard cannot stand alone. S1 provides the general architecture, and S2 plugs into it with climate-specific requirements. For more on how the ISSB standards fit together, see our detailed guide.

What Is the Difference Between IFRS S1 and S2?

While IFRS S1 and S2 share the same four-pillar structure, they serve different functions. S1 is the umbrella. S2 is the climate-specific module that sits underneath it. The table below breaks down the key differences.

Dimension	IFRS S1	IFRS S2
Full name	General Requirements for Disclosure of Sustainability-related Financial Information	Climate-related Disclosures
Scope	All sustainability-related risks and opportunities	Climate-related risks and opportunities only
Materiality	Financial materiality (investor-focused)	Financial materiality (investor-focused)
Disclosure framework	Four pillars (Governance, Strategy, Risk Management, Metrics & Targets)	Same four pillars with climate-specific requirements
Industry guidance	Refers to SASB Standards and CDSB Framework	Includes industry-based guidance covering 68 industries (SASB-derived), with industry-specific climate metrics, disclosure topics, and activity metrics
Scenario analysis	Not required	Required for climate resilience assessment
Cross-industry metrics	None specified	7 cross-industry metrics (GHG, transition risks, physical risks, opportunities, capital deployment, internal carbon price, remuneration)
GHG emissions	Not specified	Scope 1, 2, and 3 (with phase-in relief for Scope 3)
Relationship	Standalone general standard	Cannot be applied without also applying S1
Effective date	Annual periods beginning on or after 1 January 2024	Annual periods beginning on or after 1 January 2024

The most important takeaway: IFRS S2 cannot exist without S1. A company that wants to report only on climate must still build the general disclosure infrastructure that S1 requires. The four pillars, the materiality assessment process, and the connected financial statement disclosures all flow from S1.

S2 adds three layers that S1 does not: mandatory scenario analysis, specific GHG emission reporting (Scopes 1, 2, and 3), and seven cross-industry climate metrics. These additions reflect the fact that climate risk has the most developed measurement frameworks of any sustainability topic, thanks to a decade of TCFD adoption.

The Four Pillars of IFRS S1 and S2

Both standards are organized around four disclosure pillars. These pillars originated from the TCFD framework, which the Financial Stability Board created in 2017. When the ISSB absorbed the TCFD in October 2023, these pillars became the permanent architecture for global sustainability disclosure.

Pillar	IFRS S1 (General)	IFRS S2 (Climate)
Governance	Board and management oversight of sustainability risks and opportunities	Board and management oversight of climate risks specifically, including competencies and reporting frequency
Strategy	How sustainability risks affect business model, value chain, financial position, and decision-making	Climate-specific strategy impacts, transition plans, scenario analysis for resilience testing
Risk Management	Processes for identifying, assessing, prioritizing, and monitoring sustainability risks	Climate risk identification processes, including physical risk categorization (acute vs. chronic) and time horizon mapping
Metrics & Targets	Quantitative and qualitative metrics used to measure and manage sustainability risks	Scope 1/2/3 GHG emissions, 7 cross-industry metrics, industry-specific metrics, climate targets and progress

Under S1, each pillar applies broadly. A company might disclose governance processes for water risk, biodiversity, or human capital. Under S2, each pillar narrows to climate and adds prescriptive detail. For example, Strategy under S2 includes a mandatory climate resilience assessment using scenario analysis, something S1 does not require for other sustainability topics.

Governance Under IFRS S1 and S2 (S2 Paragraphs 5-7)

Companies must describe how their board or equivalent governing body oversees climate-related risks. The standard asks about specific governance mechanisms: whether climate responsibilities appear in board mandates, how often the board receives climate risk briefings, and whether executive remuneration is linked to climate targets. Boards also need to demonstrate that they have the skills and competencies to oversee climate risks effectively.

Strategy (S2 Paragraphs 8-23)

The strategy pillar is the most detailed section of IFRS S2. Companies must identify their climate-related risks and classify each one as either a physical risk or a transition risk. They need to specify the time horizons over which each risk could affect the business and explain how those risks affect the business model, value chain, and financial position. Paragraph 22 requires companies to assess their climate resilience through scenario analysis.

Risk Management (S2 Paragraphs 24-26)

Companies describe the processes they use to identify, assess, prioritize, and monitor climate risks. The standard specifically asks about input parameters and data sources used in risk assessment, how climate risks are prioritized against other business risks, and how climate risk management integrates with the company’s overall enterprise risk management framework.

Metrics and Targets (S2 Paragraphs 27-37)

Paragraph 29 defines seven cross-industry metric categories that every company must report, regardless of sector. These cover greenhouse gas emissions (Scope 1, 2, and 3), the amount and percentage of assets vulnerable to climate-related transition risks (including any stranded assets exposure), the amount and percentage of assets vulnerable to climate-related physical risks (see our IFRS S2 disclosure examples by sector), the amount aligned with climate-related opportunities, capital deployed toward climate-related risks and opportunities, internal carbon prices, and how climate considerations factor into executive remuneration. Companies also report industry-specific metrics drawn from SASB Standards guidance.

The Risk Management pillar under IFRS S1 and S2 asks companies to explain how they identify physical and transition risks, whether those risks are integrated into overall risk management, and how they prioritize climate risks relative to other business risks. The Metrics and Targets pillar is the most data-intensive. S2 requires absolute Scope 1 and Scope 2 GHG emissions, Scope 3 where material, and seven additional cross-industry metrics covering transition risk exposure, physical risk vulnerability, and capital deployment toward climate-related opportunities.

Companies reporting under IFRS S1 and S2 should map their existing TCFD disclosures to these pillars as a starting point. The structure is nearly identical. The difference is that the ISSB standards carry the force of securities regulation in jurisdictions that adopt them, while the TCFD operated on a voluntary comply-or-explain basis.

Does IFRS S2 Require Scenario Analysis?

Yes. Paragraph 22 requires every entity to assess its climate resilience using scenario analysis. The standard specifies what companies must disclose about both the results and the methodology.

On the results side, companies describe how their strategy and business model would need to adapt under different climate outcomes. They also disclose significant areas of uncertainty and their capacity to adjust, including whether existing financial resources are flexible enough to respond, whether assets can be redeployed or decommissioned, and how current investments in climate adaptation contribute to resilience.

On the methodology side, the standard requires detailed disclosure of inputs and assumptions. Companies must explain which scenarios they selected, whether those scenarios cover both physical and transition risks, and whether a Paris-aligned scenario (targeting 1.5 to 2 degrees Celsius of warming) was included. They also disclose the time horizons used, the scope of operations covered, and key assumptions about climate policies, macroeconomic trends, energy mix, and technology development.

For an analytical walkthrough of Paragraph 22’s input/output structure and the disclosures auditors look for, see our Paragraph 22 scenario analysis breakdown.

Requirement	IFRS S2 Reference	What to Disclose
Resilience assessment	Paragraph 22(a)	How strategy and business model would adapt
Scenario selection	Paragraph 22(b)(i)(1-2)	Which scenarios used, diverse range required
Paris alignment	Paragraph 22(b)(i)(4)	Whether a Paris-aligned scenario was included
Time horizons	Paragraph 22(b)(i)(6)	Short, medium, and long-term periods
Key assumptions	Paragraph 22(b)(ii)	Policy, macro trends, energy mix, technology
Scope of operations	Paragraph 22(b)(i)(7)	Locations and business units included

The application guidance (Paragraphs B1 through B18) clarifies that the approach should be “commensurate with the entity’s circumstances.” Companies with higher exposure to climate risks should use more quantitative and sophisticated analysis. Qualitative approaches combined with quantitative inputs are acceptable, especially for entities early in their scenario analysis journey. The standard expects scenario analysis capabilities to develop iteratively over time.

For guidance on choosing scenarios, see our guide to climate scenario analysis covering SSP, RCP, and NGFS climate scenarios. For a cross-framework comparison of climate scenario analysis requirements across IFRS S2, CSRD, CDP, and other frameworks, see our framework-by-framework guide.

Are IFRS S1 and S2 Mandatory?

The ISSB itself does not have enforcement power. It sets the global baseline, but each jurisdiction decides whether to make the standards mandatory, voluntary, or modified. As of early 2026, several major economies have moved to legally require IFRS S1 and S2 disclosures.

The United Kingdom endorsed UK SRS S1 and S2 on 25 February 2026, making the standards available for voluntary use immediately. The Financial Conduct Authority published its consultation paper CP26/5 on 30 January 2026 proposing mandatory application of UK SRS S2 (climate, excluding Scope 3) from financial year 2027 for listed companies and large financial institutions. Scope 3 is proposed to follow on a comply-or-explain basis from 2028, and UK SRS S1 from 2029. The FCA Policy Statement confirming the final mandate is expected in Autumn 2026. Australia moved faster: AASB S1 and S2 became mandatory for Group 1 entities (large listed companies with revenue above AUD 500 million) from 1 January 2025, with Groups 2 and 3 phasing in over subsequent years. Singapore requires SGX-listed companies to report under IFRS S2-aligned standards from financial year 2025.

Other jurisdictions, including Japan, Canada, and Brazil, have announced adoption timelines or are in active consultation. The pattern is clear: what starts as a voluntary baseline quickly becomes a regulatory requirement once securities regulators act.

Which Countries Have Adopted IFRS S1 and S2?

The adoption map is expanding rapidly. Below is a snapshot of jurisdictions that have formally adopted, endorsed, or initiated adoption of the ISSB standards.

Jurisdiction	Standard Adopted	Effective Date	Mandatory?	Applies To
United Kingdom	UK SRS S1 & S2	Endorsed Feb 2026; FCA mandate proposed Jan 2027	Voluntary now; mandate proposed	Listed companies, large financial institutions
Australia	AASB S1 & S2	January 2025 (Group 1)	Yes	Large listed entities (phased by size)
Singapore	SGX climate reporting	FY2025	Yes	SGX-listed companies
Japan	SSBJ S1 & S2	April 2027 (proposed)	Proposed	Prime Market listed companies
Canada	CSSB S1 & S2	2027 (proposed)	Proposed	Public companies (CSA consultation)
Brazil	CPC-aligned S1 & S2	2026 (phased)	Yes	Listed and large companies
Hong Kong	HKEX climate reporting	January 2025	Yes (comply or explain)	HKEX-listed companies
Nigeria	FRC Nigeria S1 & S2	January 2027	Yes	Public interest entities
South Korea	KSSB sustainability standards	2026 (voluntary), 2028 (mandatory)	Phased	KOSPI-listed companies
Malaysia	Bursa Malaysia climate reporting	2025 (Main Market)	Yes	Main Market listed companies
Turkey	CMB sustainability reporting	2025 (phased)	Yes	BIST-listed companies
Kenya	NSE sustainability standards	2026 (phased)	Yes	NSE-listed companies

Notably absent from the list is the European Union. The EU uses its own framework, the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS), rather than adopting IFRS S1 and S2 directly. However, the ISSB and EFRAG have published interoperability guidance to help companies reporting under both. For details on the EU approach, see our guide to CSRD climate risk disclosure.

Key Milestones

Date	Milestone
November 2021	ISSB established at COP26 in Glasgow
March 2022	Exposure drafts for S1 and S2 published for public consultation
June 2023	IFRS S1 and S2 formally issued
July 2023	IOSCO endorses both standards, calls on 130 member jurisdictions to adopt
October 2023	TCFD formally dissolved; monitoring responsibilities transferred to ISSB
January 2025	Australia (Group 1) and Hong Kong begin mandatory reporting
December 2025	ISSB issues amendments on GHG measurement methodology and Scope 3 relief provisions
January 2027	UK (UK SRS) and Nigeria begin mandatory reporting

For the full text of the standards, see the IFRS S1 standard page on the IFRS Foundation website.

IFRS S2 vs TCFD: What Changed?

IFRS S2 incorporates all 11 of the TCFD’s recommended disclosures. A company that fully complies with IFRS S2 automatically satisfies TCFD requirements. But the standard adds several requirements that the TCFD never included.

The most significant addition is Paragraph 29(c): a quantitative metric requiring the amount and percentage of assets vulnerable to physical risks. The TCFD recommended qualitative discussion of physical risk exposure but never required a specific number. IFRS S2 also mandates industry-based metrics derived from SASB Standards, detailed Scope 3 emissions measurement with documented methodology, disclosure of planned carbon credit usage toward net emissions targets, and financed emissions reporting for financial institutions.

The other major shift is status. The TCFD task force completed its work in October 2023, publishing its final status report. The Financial Stability Board transferred monitoring responsibilities to the IFRS Foundation, which assumed that role from 2024. TCFD was a voluntary recommendation. IFRS S2 is becoming law through jurisdictional adoption. For a full comparison of the two frameworks, see our TCFD vs ISSB guide.

Area	TCFD	IFRS S2
Status	Voluntary (task force completed October 2023)	Mandatory via jurisdictional adoption
Industry metrics	Not required	Required (SASB-derived)
Scope 3 emissions	Recommended	Required with documented methodology
Carbon credits	Not covered	Disclosure required
Physical risk metric	Qualitative guidance	Quantitative: amount and % of assets
Scenario analysis	Recommended	Required (Paragraph 22)
Financed emissions	Supplemental guidance	Required for financial institutions

The IFRS Foundation publishes a detailed IFRS S2 to TCFD comparison table that maps every TCFD recommendation to its IFRS S2 equivalent.

IFRS S2 Physical Risk Requirements

IFRS S2 requires companies to identify and disclose climate-related physical risks across two categories.

Category	Definition	Examples
Acute	Event-driven hazards that are short-term and severe	Floods, cyclones, wildfires, heatwaves, storm surge
Chronic	Long-term shifts in climate patterns	Sea level rise, sustained temperature increases, water stress, permafrost thaw

Paragraphs 10-12 of IFRS S2 require companies to describe the physical risks they have identified, classify them as acute or chronic, and specify the time horizons over which they expect impacts (short, medium, or long term). Companies must also disclose geographic concentrations of exposure. For an entity with a global asset portfolio, this means mapping each location to the physical hazards relevant to that region.

Paragraph 22 requires climate resilience assessment through scenario analysis. Companies must consider a range of climate scenarios and disclose whether one of those scenarios was aligned with the latest international agreement on climate change (the Paris Agreement’s 1.5 to 2 degrees Celsius pathway). The standard requires the disclosure, not the inclusion. The analysis must be “commensurate with the entity’s circumstances,” meaning smaller companies can use qualitative approaches while entities with significant physical risk exposure are expected to use quantitative models.

Paragraph 29(c) is the most data-demanding metric: companies must disclose the “amount and percentage of assets or business activities vulnerable to physical risks.” Reporting this accurately requires asset-level physical risk data across multiple hazards and time horizons. For eight specific industries, IFRS S2’s Industry-based Guidance prescribes additional physical-risk metrics that define exact thresholds and disclosure units. Empirically, the first wave of IFRS S2 reporters struggled with this requirement: five of six disclosed no quantified physical-risk amount. For a detailed breakdown of hazard types, see our physical climate risk assessment guide.

How to Prepare for IFRS S2 Compliance

Companies approaching IFRS S1 and S2 for the first time can break the work into six steps.

Step 1: Map your current disclosures. If you already report under TCFD, compare your existing disclosures against the IFRS S2 requirements paragraph by paragraph. Identify which of the four pillars you already cover and where the gaps are. Companies new to climate disclosure should start with a gap analysis against the full standard.

Step 2: Build your physical risk data layer. Paragraph 29(c) requires the amount and percentage of assets vulnerable to physical risks. Meeting that requirement starts with hazard identification across your locations, scenario-based projections for how those hazards change over time, and financial quantification of potential exposure. Platforms like Continuuiti address IFRS S2’s physical risk requirements by assessing 12 climate hazards across multiple SSP scenarios and time horizons, providing the structured hazard data and flood damage estimates that feed into Paragraph 29(c) asset vulnerability disclosures and Paragraph 22 climate resilience assessments.

For teams building the physical-risk data layer required by Paragraph 29(c), see the Climate Risk API documentation, which exposes 12 hazards across multiple scenarios and time horizons at any global coordinate.

Step 3: Establish governance processes. Assign board-level oversight for climate risks. Document how the board receives climate information, how often it reviews climate risks, and whether climate targets factor into executive compensation.

Step 4: Conduct a materiality assessment. IFRS S2 uses financial materiality: report climate risks that could reasonably affect investors’ decisions about your company. Assess each identified risk for likelihood, magnitude, and potential financial impact.

Step 5: Begin scenario analysis. Select multiple climate scenarios that are commensurate with your circumstances and exposure profile (Paragraph 22 plus Appendix B Paragraph B17). Document your inputs, assumptions, and the scope of operations covered. Disclose whether one of your scenarios is aligned with the Paris Agreement’s latest international climate goal. The standard allows you to start with qualitative analysis combined with quantitative inputs, and build toward more sophisticated quantitative approaches over time as your data and modelling capabilities mature.

Step 6: Close gaps against your TCFD baseline. If you were already a TCFD reporter, the transition is incremental. Focus on the new IFRS S2 requirements that go beyond TCFD: industry-based metrics, Scope 3 emissions methodology, carbon credit disclosure, and the Paragraph 29(c) quantitative physical risk metric. For a worked example showing how a complete IFRS S2 disclosure handles all of these new requirements in one sector, see our banking sector sample.

Paragraph 29(c) hides four definitional choices in one sentence: amount of what, percentage of what denominator, vulnerable under what scenario / horizon / hazard / threshold, and assets in what scope. The full walkthrough of Paragraph 29(c) covers each.

Frequently Asked Questions

What is IFRS S1 and IFRS S2?

IFRS S1 is a global standard that requires companies to report sustainability risks affecting their finances. IFRS S2 adds climate-specific requirements on top of S1, including greenhouse gas emissions and scenario analysis. Together, they give investors a clear picture of how sustainability and climate risks could affect a company’s future cash flows and business value.

What are the four pillars of IFRS S1 and S2?

Both standards are built on four pillars: Governance (board oversight), Strategy (business model impacts including transition plans and scenario analysis), Risk Management (identification and monitoring processes), and Metrics and Targets (quantitative measurements including GHG emissions and seven cross-industry metrics). Under S2, each pillar adds climate-specific disclosures: governance describes board oversight of climate risks, strategy includes transition plans and Paragraph 22 climate resilience scenario analysis, risk management covers physical and transition risk identification, and metrics and targets includes Scope 1/2/3 GHG emissions and the seven Paragraph 29 cross-industry metrics.

Are IFRS S1 and S2 mandatory?

The ISSB standards are voluntary at the global level. However, individual jurisdictions make them legally binding through local adoption. Australia, Singapore, Hong Kong, and Brazil already require ISSB-aligned reporting. The UK has endorsed UK SRS S1 and S2 (voluntary use available now); the FCA’s mandatory application is proposed from 1 January 2027 pending final Policy Statement in Autumn 2026. Nigeria’s FRC has set January 2027 as its mandatory effective date for public interest entities. Check your local securities regulator for applicable requirements.

Who does IFRS S1 and S2 apply to?

The standards are designed for entities that prepare general purpose financial reports for investors, lenders, and creditors. In practice, adopting jurisdictions typically apply them to listed companies first, then phase in requirements for large private companies and financial institutions. The exact scope varies by country and usually depends on company size and listing status.

What is the key difference between IFRS S1 and IFRS S2?

IFRS S1 covers all sustainability topics (water, biodiversity, human capital, and more) at a general level. IFRS S2 focuses exclusively on climate and adds specific requirements for GHG emissions, scenario analysis, and seven cross-industry climate metrics. Any entity applying S2 must also apply S1, because S1 provides the underlying disclosure architecture.

What is the IFRS S1 and S2 effective date?

The ISSB set an effective date of annual reporting periods beginning on or after 1 January 2024. However, the actual compliance date depends on when each jurisdiction adopts the standards into local law. Australia started in January 2025. The UK and Japan are targeting 2027. Most jurisdictions include phase-in provisions based on company size.

What are the cross-industry metrics under IFRS S2?

Paragraph 29 requires seven cross-industry metric categories:

1. Greenhouse gas emissions across Scope 1, 2, and 3 with measurement methodology.
2. The amount and percentage of assets or business activities vulnerable to climate-related transition risks.
3. The amount and percentage of assets or business activities vulnerable to climate-related physical risks.
4. The amount and percentage of assets or business activities aligned with climate-related opportunities.
5. Capital expenditure, financing, or investment deployed toward climate-related risks and opportunities.
6. Internal carbon prices used in decision-making.
7. Whether and how climate-related considerations are factored into executive remuneration.

Is IFRS S2 the same as TCFD?

Not exactly. IFRS S2 incorporates all 11 TCFD recommended disclosures, so full IFRS S2 compliance satisfies TCFD requirements. But IFRS S2 adds requirements TCFD did not cover: industry-based metrics from SASB Standards, enhanced Scope 3 emissions methodology, carbon credit disclosure, and a quantitative physical risk metric requiring the amount and percentage of vulnerable assets (Paragraph 29(c)).

What is Paragraph 29(c) and why is it the hardest IFRS S2 disclosure?

Paragraph 29(c) requires companies to disclose “the amount and percentage of assets or business activities vulnerable to climate-related physical risks.” It is one of seven cross-industry metric categories under Paragraph 29 of IFRS S2.

The disclosure looks like a single number but it hides four definitional choices: (1) amount of what (book value, replacement cost, exposure value), (2) percentage of what denominator (total assets, asset class, business segment), (3) vulnerable under what (scenario, time horizon, hazard, threshold), and (4) assets in what scope (own operations, value chain, geographic concentration).

Each of those four questions has multiple defensible answers, and the standard does not pick one. Companies must disclose the choices they made and explain why. For a paragraph-by-paragraph walkthrough of how to construct a defensible Paragraph 29(c) disclosure, see our Paragraph 29(c) breakdown.

Does IFRS S2 require asset-level physical risk data?

IFRS S2 does not use the phrase “asset-level data” but its requirements effectively demand it for several disclosures. Paragraph 29(c) requires the amount and percentage of assets vulnerable to physical risks, which cannot be calculated without per-asset hazard exposure data. Paragraph 22(b)(i) requires disclosure of the scope of operations covered by scenario analysis, which forces companies to specify which locations, business units, or asset classes were assessed. Paragraphs 10 to 12 require companies to identify physical risks and disclose geographic concentrations of exposure.

In practice, meeting these requirements means mapping each asset (or each material location) to the climate hazards relevant to its location, across scenario and time-horizon combinations specified in your scenario analysis. Companies with concentrated portfolios may be able to meet the requirements with location-level data; companies with distributed asset bases typically need automated asset-level assessment platforms. The Continuuiti Climate Risk API exposes 12 hazards across multiple SSP scenarios and time horizons at any global coordinate, supporting Paragraph 29(c) numerator construction and Paragraph 22 scope-of-operations disclosure.

What climate scenarios should we use for IFRS S2 scenario analysis?

IFRS S2 Paragraph 22 does not prescribe specific scenarios. It requires entities to use scenarios that are commensurate with their circumstances and to disclose which scenarios were used, whether they cover transition or physical risks, and whether one of them was aligned with the latest international climate agreement.

In practice, three scenario families dominate IFRS S2 disclosures:

• NGFS scenarios (Network for Greening the Financial System): Phase IV scenarios include Net Zero 2050, Delayed Transition, Nationally Determined Contributions, and Current Policies, with explicit RCP mappings. Used heavily by financial institutions because they integrate transition and physical pathways.
• IPCC Shared Socioeconomic Pathways (SSP) and Representative Concentration Pathways (RCP): SSP1-2.6, SSP2-4.5, SSP5-8.5 (and the older RCP equivalents) are the standard inputs for asset-level physical hazard projections. Note that SSP1-2.6 is absent from the CMIP6 NEX-GDDP collection used by most physical climate risk platforms.
• IEA World Energy Outlook scenarios (Net Zero by 2050, Announced Pledges, Stated Policies): used primarily for transition-risk modelling in energy-intensive sectors.

For the analytical structure of Paragraph 22 scenario disclosure (the input/output split, what auditors look for, and where reporters most often skip), see our Paragraph 22 walkthrough.

Do private companies need to comply with IFRS S2?

It depends on the jurisdiction. The ISSB sets the standards but does not mandate them; jurisdictions decide whether to extend mandatory application beyond listed companies. Some examples of how this varies as of mid-2026:

• Australia (AASB S2): applies to listed AND large private companies meeting size thresholds. Group 1 captures entities meeting two of three criteria (consolidated revenue at or above AUD 500 million, gross assets at or above AUD 1 billion, employees at or above 500), plus NGER reporters above 50,000 tCO2-e. Group 2 (from 1 July 2026) lowers the thresholds; Group 3 (from 1 July 2027) lowers them further.
• United Kingdom (UK SRS proposed): the FCA’s CP26/5 proposes mandatory application for listed companies and large financial institutions only, not private companies.
• Singapore (SGX): SGX-listed companies only.
• Brazil (CPC-aligned): listed companies and large private companies.
• European Union (CSRD/ESRS): applies to large undertakings (listed and unlisted) meeting size thresholds, though the Omnibus simplification proposal would narrow scope to companies with 1,000+ employees.

Check your local securities regulator or legislative authority for the threshold matrix that applies to you.

What is the difference between IFRS S2 and ESRS E1?

Both standards require climate-related disclosures including physical risk metrics, but they differ on three dimensions that matter for preparers:

• Materiality: IFRS S2 uses financial materiality only (what affects investors). ESRS E1 uses double materiality (financial materiality plus impact materiality, what the company does to the climate, not just what climate does to the company).
• Physical risk metric: IFRS S2 Paragraph 29(c) requires the amount and percentage of assets vulnerable to physical risks. ESRS E1-9 (Anticipated Financial Effects) requires the carrying amount of assets materially exposed to physical risks BEFORE adaptation actions, plus the percentage of those assets covered by adaptation actions, plus net revenue from physical-risk-exposed activities. The data layer is largely the same; the disclosure framing is more granular under E1-9.
• Geographic and scoping orientation: IFRS S2 is jurisdiction-agnostic. ESRS E1 is EU-focused (Paris-aligned, with explicit references to EU climate goals). ESRS also requires non-materiality explanations: if a company concludes climate is not material, it must explain how it reached that conclusion. IFRS S2 has no equivalent requirement.

Companies subject to both frameworks (typically EU-listed multinationals) can use the shared data layer to satisfy both disclosures. The ISSB and EFRAG have published interoperability guidance to support this.

For more on the EU’s framework, see our CSRD climate risk disclosure guide.

What does the IFRS S2 industry-based guidance require for my sector?

Paragraph 32 of IFRS S2 requires companies to disclose industry-based metrics that are associated with their business model and activities. The Industry-based Guidance on Implementing IFRS S2 covers 68 industries (drawn from the SASB sector taxonomy) with industry-specific disclosure topics, metrics, and activity metrics.

For physical climate risk specifically, eight industries have a prescribed metric under SASB topic codes ending in -450a (the climate-physical-risk topic family): commercial banks, mortgage finance, investment banking and brokerage, asset management, insurance, real estate, real estate services, and oil and gas exploration and production. For these sectors, the IBG narrows what would otherwise be an open-ended Paragraph 29(c) construction problem by prescribing specific metrics: for example, mortgage portfolios in 100-year flood hazard areas, or insurance probable maximum loss from weather-related natural catastrophes.

For the eight-sector breakdown of which industries have prescribed physical-risk metrics and how they pair with Paragraph 29(c) carrying-amount disclosure, see our IBG 450a walkthrough.

IFRS S1 provides the general disclosure framework for all sustainability risks. IFRS S2 adds the climate-specific layer, including GHG emissions, physical risk metrics, and scenario analysis. With more than 30 jurisdictions now adopting or referencing these standards, IFRS S1 and S2 are becoming the default global baseline for sustainability reporting. Companies preparing for compliance should start by mapping their existing disclosures to the four-pillar structure, then build the data infrastructure needed for the quantitative metrics that S2 demands.