Overview
IFRS S1 and S2 are standards published by the International Sustainability Standards Board (ISSB), a body set up in 2021 under the IFRS Foundation, the same organisation that oversees global accounting standards. The ISSB’s mandate is to create a single, globally consistent baseline for sustainability-related disclosures in financial filings. S1 and S2 were finalised in June 2023.
S1 covers general sustainability-related financial disclosures: the overarching requirements for how companies should report on any sustainability risk or opportunity that could affect their enterprise value. S2 is the climate-specific standard, and it builds directly on TCFD, adopting the same four-pillar structure (governance, strategy, risk management, metrics and targets) while adding more detail and granularity.
Together, S1 and S2 represent the most significant step toward a universal climate disclosure language since TCFD’s recommendations were published in 2017. The ISSB was explicitly designed to consolidate a fragmented landscape: it absorbed the climate and ESG disclosure work of the CDSB, the Value Reporting Foundation (which housed SASB and IIRC), and then TCFD itself when that body dissolved in 2024.
What S2 Requires
IFRS S2 requires companies to disclose their exposure to climate-related risks and opportunities across the same categories TCFD established, but with more specificity. Physical Risks and Transition Risks must be assessed against quantitative scenarios. Companies must explain how climate considerations are embedded in governance and strategy.
On metrics, S2 requires disclosure of Scope 1, Scope 2, and Scope 3 emissions. For financial institutions specifically, it requires disclosure of financed emissions, the Scope 3 emissions attributable to a bank’s or asset manager’s lending and investment portfolio. This is a significant expansion compared to TCFD, which treated Scope 3 as optional in most cases.
S2 also requires cross-industry climate metrics (absolute emissions, emissions intensity, capital deployment toward climate-related risks and opportunities) alongside industry-specific metrics drawn from SASB standards. The intent is comparability: investors should be able to assess climate exposure across companies in the same sector.
Global Adoption
The ISSB standards have been endorsed by IOSCO (the global body of securities regulators), which effectively signals to member jurisdictions that they should consider adoption. Countries moving toward mandatory adoption include the UK, Australia, Japan, Singapore, Canada, and Brazil. In the EU, the picture is more complex: the CSRD and its European Sustainability Reporting Standards (ESRS) cover similar ground but go further on double materiality and social issues. The EU and ISSB have been working toward interoperability.
The US remains a significant holdout. The SEC’s own climate disclosure rule, finalised in 2024, was more limited in scope than ISSB S2, and faced legal challenges. The result is a global landscape where ISSB is the emerging baseline, but not yet universal.
S1 vs S2: The Relationship
S1 sets the general framework: the principles for identifying which sustainability topics are material, how to think about time horizons, and how disclosures should connect to financial statements. S2 applies that framework specifically to climate. The intention is that future ISSB standards on other topics (nature, human capital) will follow the same S1 architecture.
In practice, most attention has focused on S2, because climate disclosure is the most developed and demanded by investors. But S1 matters for communications professionals: it establishes that companies are expected to consider all sustainability-related risks that affect enterprise value, not just climate.