The IFRS Foundation’s International Sustainability Standards Board (ISSB) announced today a series of amendments to the greenhouse gas (GHG) emissions disclosure requirements under its IFRS S2 climate-related reporting standard, with some of the most significant changes aimed at easing and clarifying requirements for financial firms’ disclosures about the climate impact of their financing activities.

According to the ISSB, the reliefs and clarifications included in the new update were made in response to challenges that were identified as companies started to apply the IFRS S2 Standard. The ISSB launched a consultation on the amendments earlier this year.

The ISSB was launched in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards to provide investors with information about companies’ sustainability risks and opportunities. The IFRS released the inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023. To date, around 40 jurisdictions have started the process to use the standards.

One of the key changes to the standard is an update to its disclosure requirements regarding Scope 3 category 15 emissions, which is focused on value chain emissions relating to investments, such as financial services companies’ investment, financing and capital markets activities.

In its update, the ISSB clarifies that financial firms following its standard may limit reporting on these Scope 3 emissions to those attributed to loans and investments made by the entity, or for asset management firms to emissions attributed to assets under management, indicating that facilitated emissions that are associated with investment banking activities, and insurance-associated emissions that are associated with insurance and reinsurance underwriting activities are not required to be reported. The amendment also specified that companies are permitted to exclude GHG emissions attributable to derivatives from their Scope 3 financed emissions reporting.

Additional changes included an amendment for entities with commercial banking or insurance activities reporting on financed emissions to provide relief from a requirement to use the Global Industry Classification Standard (GICS) in disclosing disaggregated financed emissions information, with alternative classifications permitted to be used, as well as permission for reporting companies to use jurisdiction-required Global Warming Potential (GWP) values that are not from the latest Intergovernmental Panel on Climate Change (IPCC) assessment report, if required by a jurisdictional authority to use other GWP values, and clarification on the jurisdictional relief to use a measurement method other than the Greenhouse Gas Protocol for measuring GHG emissions.

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.”

Click here to access the IFRS S2 amendments.