The International Sustainability Standards Board has introduced a new set of targeted amendments to the IFRS S2 climate disclosure standard, aiming to resolve practical challenges that surfaced as companies began implementing the requirements. The revisions focus heavily on easing the reporting burden for financial institutions that struggled to measure and classify the climate impact of their financing and investment activities. The changes mark one of the most consequential updates to the standard since its release and raise a broader question about whether the new flexibility will help accelerate global adoption or dilute the level of detail investors expect from sustainability disclosures.

The update follows a formal consultation launched earlier this year after early adopters highlighted difficulties with several GHG emissions reporting categories. The ISSB noted that the amendments were directly shaped by feedback from preparers who encountered inconsistent data availability, unclear boundary definitions and practical barriers in measuring value chain emissions. The Board’s objective was to refine the standard while preserving its core purpose of providing investors with transparent, comparable climate information. These steps come as the IFRS Sustainability Disclosure Standards continue gaining traction, with close to forty jurisdictions beginning regulatory processes to integrate or reference IFRS S1 and IFRS S2.

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One of the most substantial revisions relates to the reporting of Scope 3 category fifteen emissions, which cover the value chain impacts tied to financial activities such as lending, investment, capital markets services and insurance underwriting. The ISSB’s clarification confirms that financial institutions applying IFRS S2 may confine their financed emissions disclosures to the emissions associated with loans and investments held on their balance sheet. Asset management companies may similarly focus on emissions tied to assets under management. By doing so, firms are not required to quantify facilitated emissions from investment banking activities or emissions arising from underwriting and reinsurance activities. The Board also established that emissions linked to derivative exposures may be excluded entirely from Scope 3 financed emissions calculations, resolving a long-standing ambiguity that banks and insurers had repeatedly raised during the consultation.

Further amendments introduce relief for banks and insurers that previously relied on the Global Industry Classification Standard to break down financed emissions information at the sector level. Under the new guidance, entities may use alternative classification systems as long as they support meaningful disaggregation for investors. Another adjustment grants companies the ability to apply Global Warming Potential values mandated by local authorities, even if the values do not correspond to the most recent Intergovernmental Panel on Climate Change assessment report. This change reflects the reality that many jurisdictions update their regulatory GWP factors on different timelines. The ISSB also clarified that entities eligible for jurisdictional relief may use measurement methods other than the Greenhouse Gas Protocol, reducing conflicts between global standards and local compliance requirements.

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As the amendments were released, ISSB Vice Chair Sue Lloyd emphasized that the Board sought to strike a balance between maintaining investor confidence and easing overly complex reporting obligations. She noted that the refinements were designed to provide real relief without undermining the broader objective of decision-useful information. The adjustments are expected to support a smoother transition for financial institutions, many of which are confronting rising expectations from regulators, investors and civil society around climate accountability. Whether the new flexibility will lead to more consistent global adoption of IFRS S2, or encourage varying interpretations across jurisdictions, will become clearer as regulators finalize their implementation roadmaps and companies begin preparing their next cycle of sustainability reports.

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