ISSB standards: a guide to IFRS S1 and S2 adoption

What Are the ISSB Standards

The International Sustainability Standards Board (ISSB) was established by the IFRS Foundation in November 2021 at COP26. Its mandate is to develop a global baseline of sustainability disclosure standards focused on investor decision-making. In June 2023, the ISSB issued its first two standards: IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures). Both are effective for annual reporting periods beginning on or after 1 January 2024.

The standards consolidate and build upon the recommendations of the TCFD (whose monitoring responsibilities were transferred to the ISSB in 2024), the SASB Standards (now governed by the ISSB as part of the IFRS Foundation), and the CDSB framework. Companies applying IFRS S1 and S2 meet the TCFD recommendations in full, since they are fully incorporated into the standards.

The ISSB standards use single (financial) materiality: information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions that primary users of general purpose financial reports make on the basis of those reports. This contrasts with the EU's double materiality approach under the ESRS. For companies subject to both frameworks, the IFRS Foundation and EFRAG published formal interoperability guidance in May 2024.

IFRS S1: General Sustainability Disclosures

IFRS S1 is the general requirements standard. It applies to all sustainability-related risks and opportunities that could reasonably be expected to affect an entity's cash flows, access to finance, or cost of capital over the short, medium, or long term. It is not limited to climate. It covers the full spectrum of sustainability topics, from water and biodiversity to human capital and supply chain risks.

The standard is built on the four-pillar structure inherited from the TCFD:

• Governance: the processes, controls, and procedures an entity uses to monitor and manage sustainability-related risks and opportunities
• Strategy: the entity's approach to managing those risks and opportunities, including how they affect its business model, value chain, and financial planning
• Risk management: the processes used to identify, assess, prioritise, and monitor sustainability-related risks and opportunities
• Metrics and targets: the entity's performance, including progress toward targets it has set or is required to meet

For topics beyond climate, IFRS S1 does not prescribe specific disclosure requirements. Instead, it requires entities to identify material sustainability-related risks and opportunities and to use their judgment, drawing on the SASB Standards (now integrated within the IFRS Foundation) and other relevant sources of guidance, which may include the ESRS, GRI Standards, TNFD recommendations, and other applicable frameworks, to determine what disclosures are needed. A "climate-first" transitional relief allows entities to report only on climate-related risks and opportunities in their first year of applying the standards.

IFRS S2: Climate-Related Disclosures

IFRS S2 is the prescriptive climate standard. It requires entities to disclose material information about climate-related risks and opportunities, both physical and transition, using the same four-pillar structure as S1. Key requirements include:

• Climate resilience: assessment of the entity's resilience to climate-related changes, developments, and uncertainties, using climate-related scenario analysis
• Greenhouse gas emissions: absolute Scope 1, Scope 2, and Scope 3 GHG emissions, measured in accordance with the GHG Protocol
• Transition plans: disclosure of the entity's climate-related transition plan, if one exists, and progress against it
• Anticipated financial effects: the current and anticipated financial effects of climate-related risks and opportunities on the entity's financial position, performance, and cash flows
• Industry-based metrics: industry-specific disclosures based on the SASB Standards (the Industry-based Guidance on Implementing IFRS S2)

Scope 3 emissions are mandatory where material, covering all 15 categories of the GHG Protocol Corporate Value Chain Standard. A one-year transitional relief allows entities to defer Scope 3 disclosure in their first reporting period. The December 2025 amendments further clarified and eased several Scope 3 requirements, particularly for financial institutions.

The December 2025 Amendments to IFRS S2

In December 2025 (11 December), the ISSB issued targeted amendments to the GHG emissions disclosure requirements in IFRS S2, responding to application challenges identified during the first year of implementation. The amendments are effective for reporting periods beginning on or after 1 January 2027, with early application permitted. The ISSB also issued consequential amendments to three SASB Standards (Asset Management & Custody Activities, Commercial Banks, and Insurance) to align financed emissions metrics with the revised IFRS S2 requirements.

Key changes

• Scope 3 Category 15 relief for financial institutions: entities may now limit what they include in Scope 3 Category 15 emissions to only their financed emissions (attributable to loans and investments, or assets under management for asset managers). Facilitated emissions from investment banking activities and insurance-associated emissions from underwriting activities are no longer required to be reported. Where this limitation is applied, entities must disclose what has been excluded.
• Mandatory financed emissions subtotal: a new mandatory subtotal for financed emissions within Scope 3 Category 15 reporting, improving comparability across financial institutions.
• Industry classification flexibility: entities are no longer required to use the Global Industry Classification Standard (GICS) exclusively when disaggregating financed emissions by industry. Alternative classification systems are now permitted, reducing costs for entities in jurisdictions that do not use GICS.
• Jurisdictional relief for GWP values: entities subject to jurisdictional requirements that specify global warming potential (GWP) values other than those of the IPCC may now use those jurisdictional values, avoiding conflicts between the ISSB standard and local regulations.
• Jurisdictional relief for measurement methods: the existing relief from using the GHG Protocol Corporate Standard has been extended and clarified for entities in jurisdictions with alternative measurement frameworks.

How jurisdictions are adopting the standards

As of early 2026, over 30 jurisdictions have adopted, endorsed, or are in the process of finalising ISSB-aligned reporting frameworks, collectively representing more than 60% of global GDP. According to S&P Global, 21 jurisdictions had adopted the standards on a mandatory or voluntary basis with reporting starting between January 2024 and January 2026, with rules becoming effective at the start of 2026 in several additional jurisdictions including Chile, Qatar, and Mexico. The IFRS Foundation has published 17 formal jurisdictional profiles and 16 additional snapshots for jurisdictions still finalising their approaches. Adoption takes various forms: some jurisdictions adopt IFRS S1 and S2 in full, others adopt only climate disclosures (S2), and others develop national standards that are "based on" or "aligned with" the ISSB standards.

ESRS and ISSB: Interoperability for Dual-Framework Companies

Companies subject to the EU's ESRS under the CSRD that also need to satisfy ISSB requirements face a dual-framework reporting challenge. The IFRS Foundation and EFRAG published joint interoperability guidance in May 2024 to address this, demonstrating high alignment particularly in climate-related disclosures.

The IFRS Foundation and EFRAG interoperability guidance provides a starting point for comparing ESRS and IFRS S2 climate disclosures. Using one framework does not automatically establish compliance with the other. The Commission adopted revised ESRS on 3 July 2026. Regulation (EU) 2026/1563 was published on 21 September 2026, enters into force on 10 November 2026 and applies to financial years beginning on or after 1 January 2027, with transitional choices for 2026. Dual-framework reporters should check the final texts and each relief they use.

What's Coming Next: Nature, Human Capital, and SASB Enhancements

The ISSB's 2024–2026 work plan extends significantly beyond the current S1 and S2 standards:

Nature-related disclosures

On 22 October 2026, the ISSB published an exposure draft of IFRS Sustainability Disclosure Practice Statement 1, Nature-related Disclosures. Comments are due by 19 February 2027. The proposal supplements IFRS S1 and S2 and is still subject to consultation. It is not a final mandatory IFRS S3 standard. The ISSB will consider feedback on both its content and proposed form.

Human capital

The ISSB is researching information needs related to human capital: workforce composition, compensation, turnover, health and safety, training, and employee engagement. This is expected to remain at the research stage during 2026, with no exposure draft imminent.

SASB Standards enhancements

The ISSB is updating the SASB Standards (77 industry-specific standards now governed by the IFRS Foundation) to align with IFRS S1 and S2 and improve international applicability. Exposure drafts covering amendments across multiple industries were published in mid-2025 with a 150-day comment period, with further amendments expected throughout 2026. According to the IFRS Foundation, exposure drafts covering amendments to SASB standards across multiple industries were published in mid-2025 with a 150-day comment period. Further amendments are expected throughout 2026, with additional SASB standards (including electric utilities and food and beverage) in the pipeline. The final scope and timing of these amendments are subject to the ISSB's standard-setting process and stakeholder feedback.

Key Implementation Challenges

The PwC-IIF Global 2026 ISSB Adoption Survey, covering 24 financial institutions managing over $18 trillion in assets, identified the most significant compliance challenges facing institutions adopting the standards. Anticipated financial effects was cited as the most significant compliance challenge for both S1 and S2. Other major challenges identified include Scope 3 data collection, data limitations and reliance on counterparty estimates, and the development of decision-grade climate scenario analysis. These findings are consistent with broader implementation experience across corporates.

• Anticipated financial effects: quantifying the forward-looking financial impact of sustainability and climate-related risks over time horizons longer than those used in conventional financial forecasting. Requires significant management judgment and governance oversight.
• Scope 3 emissions: particularly Categories 1 (purchased goods and services), 11 (use of sold products), and 15 (investments) for financial institutions. Data gaps, methodological inconsistencies, and reliance on estimates remain systemic challenges.
• Climate scenario analysis: most companies describe scenarios qualitatively but do not quantify business implications or test strategy resilience under different climate pathways. Moving from narrative to decision-grade scenario analysis requires data, models, and governance capacity that many organisations are still building.
• Multi-framework compliance: companies subject to both ISSB and ESRS (or other jurisdictional requirements) face complexity in mapping disclosure requirements, managing overlaps, and avoiding duplication while ensuring no gaps.
• Integration with financial reporting: ISSB standards are designed to be reported alongside financial statements. Connecting sustainability and financial data, ensuring consistency, and building integrated governance processes are operationally complex.

How to prepare

We recommend starting with the reporting obligations that apply to each entity in the group. Confirm the standards used locally, the reporting period, available reliefs and assurance requirements. Where reporting is still voluntary or adoption is planned, assess what investors, lenders or customers need before deciding how much preparation to undertake.

Step 1: Map your jurisdictional exposure

Identify every jurisdiction where your entity has reporting obligations or listing requirements. Determine whether each jurisdiction has adopted ISSB standards (and which version: full S1+S2, climate-only, or national adaptation), the ESRS under CSRD, or both. This jurisdictional mapping is the foundation for all subsequent decisions.

Step 2: Conduct a financial materiality assessment

ISSB standards require disclosure of sustainability-related risks and opportunities that could affect the entity's financial prospects. If you have already conducted a double materiality assessment under ESRS, the financial materiality component is aligned with the ISSB's requirements. If you have not, begin with a structured assessment of how sustainability topics affect your cash flows, access to finance, and cost of capital.

Step 3: Build your GHG emissions infrastructure

Scope 1, 2, and 3 emissions are at the core of IFRS S2. Invest in measurement systems that use the GHG Protocol methodology, establish data collection processes across your value chain, and prepare for limited-assurance-ready data quality. Scope 3 in particular requires early supplier engagement. Start with the categories that are material and build outward.

Step 4: Develop climate scenario analysis capability

IFRS S2 requires assessment of climate resilience using scenario analysis. Move beyond qualitative narrative to quantified, decision-grade analysis that tests your strategy under different climate pathways. This requires cross-functional collaboration between sustainability, risk, finance, and strategy functions.

Step 5: Design for interoperability

If your organisation reports under both ESRS and ISSB requirements, use the EFRAG-ISSB interoperability guidance (May 2024) to map the overlapping disclosures. Identify which information can be collected once and where separate definitions, calculations or disclosures are needed. Check the effect of any relief used under either framework before asserting compliance with both.

Frequently Asked Questions

Conclusion

The ISSB standards provide a common reference point, but companies still need to work through the rules in each jurisdiction. We suggest keeping a clear record of the requirements that apply, the reporting dates and any reliefs used. That gives the teams involved a shared basis for deciding what to collect, how to check it and when it needs to be ready.

Since this guide was written, the FCA has finalised its UK SRS rules, the ISSB has issued its nature-related exposure draft, and the Commission has adopted revised ESRS. The jurisdiction table and any cross-framework implementation plan should therefore be read with the dated correction notes and the applicable local rules.

Disclaimer: This article is intended as a practical orientation guide, not legal advice. The original article reflected information available as of mid-March 2026. Selected status statements were corrected on 1 November 2026. Jurisdictional adoption of ISSB standards is evolving rapidly. The scope, application dates, transitional reliefs, and assurance requirements vary by jurisdiction and may change as national regulatory processes are finalised. Since this guide was written, the FCA has finalised its UK SRS rules, the ISSB has issued its nature-related exposure draft, and the Commission has adopted revised ESRS. The jurisdiction table and any cross-framework implementation plan should therefore be read with the dated correction notes and the applicable local rules. Readers should verify jurisdiction-specific requirements against the authoritative legal texts in their markets and seek qualified legal counsel before making compliance decisions. Other jurisdictional statements and implementation details remain subject to review.