ISSB (IFRS S1 & S2): A Global Adoption Guide for Corporates and Financial Institutions

The ISSB's IFRS S1 and S2 standards are becoming the global baseline for sustainability disclosure. As of early 2026, over 30 jurisdictions are adopting or aligning with them — including the UK, Australia, Japan, Brazil, Hong Kong, and Singapore. In December 2025, the ISSB issued targeted amendments to S2's Scope 3 requirements and launched standard-setting on nature-related disclosures. This guide explains what the standards require, where they are mandatory, how they interact with the EU's ESRS, and what companies operating across multiple jurisdictions should do now.

By Bo Yu, Founder & Managing Director  |  Updated March 2026  |  ~20 min read

30+

Jurisdictions adopting or aligning

60%+

Global GDP represented

4 pillars

Governance, Strategy, Risk Mgmt, Metrics & Targets

Oct 2026

Nature-related exposure draft targeted (not confirmed)

Executive Summary

IFRS S1 (general sustainability) and S2 (climate) are becoming the global baseline for sustainability disclosure. Over 30 jurisdictions have adopted or are adopting ISSB-aligned standards, including the UK, Australia, Japan, Brazil, Hong Kong, and Singapore. The standards require entity-level disclosure of sustainability-related risks and opportunities across governance, strategy, risk management, and metrics. Companies operating internationally should prepare for ISSB-aligned reporting regardless of their home jurisdiction.

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.

The ISSB is a standard-setter, not a regulator

The ISSB does not mandate adoption. Individual jurisdictions decide whether, when, and how to incorporate the standards into their national regulatory frameworks. This means the scope, application date, transitional reliefs, and assurance requirements vary by jurisdiction. Companies must identify which jurisdiction-specific rules apply to them — not just the ISSB standards in the abstract.

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.

Futureproof perspective: The December 2025 amendments are narrower than some had anticipated. The ISSB did not remove Scope 3 requirements — it provided targeted relief for financial institutions where measurement methodologies are still maturing. The core requirement to report material Scope 3 emissions across all 15 categories is unchanged for non-financial corporates. Companies should not interpret these amendments as a general weakening of Scope 3 obligations.

Global Adoption: Where ISSB Standards Are Mandatory

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.

Jurisdiction	Status	Key details
United Kingdom	Feb 2026	UK SRS S1 and S2 published 25 February 2026 for voluntary use, closely aligned with ISSB standards. FCA consultation (CP26/5, published 30 January 2026, closing 20 March 2026) proposes mandatory UK SRS S2 (climate) for listed companies from FY beginning 1 January 2027. Scope 3 on comply-or-explain basis (with one-year transitional deferral available). Non-climate S1 disclosures proposed on comply-or-explain basis from 2027 (with up to two-year transitional relief). SASB consideration optional ("may" rather than "shall"). Scope 3 transitional relief timing left to future regulators.
Australia	Mandatory	AASB S2 (climate) mandatory from January 2025 for Group 1 entities. AASB S1 (general) voluntary. Phased rollout: Group 2 from July 2026, Group 3 from July 2027. Climate-first approach; SASB industry metrics not required.
Japan	Adopted	SSBJ standards (three standards aligned with IFRS S1 and S2) published 5 March 2025. Voluntary from FY ending March 2026. Mandatory phased by market capitalisation: ¥3 trillion+ from FY ending March 2027; ¥1 trillion+ from FY ending March 2028; ¥500 billion+ from FY ending March 2029. Targets Prime Market-listed companies on the Tokyo Stock Exchange.
Hong Kong	In effect	HKFRS S1 and S2 in effect. Reporting from January 2025 on a "comply or explain" basis for Main Board issuers. All Main Board issuers report on a comply-or-explain basis from January 2025. Mandatory climate reporting from 2026 for Large Cap Issuers (Hang Seng Composite LargeCap Index constituents). HKEX to consult in 2027 on mandating full HKFRS sustainability reporting for all listed PAEs, with expected application from 2028.
Brazil	Mandatory	CVM Resolution 193 makes ISSB-aligned disclosure mandatory for listed companies from 1 January 2026. Financial institutions are subject to separate timelines varying by segment, with some regulated entities phasing in from 2028. Voluntary adoption available since 2024. Limited assurance for FY 2025; reasonable assurance required from FY 2026.
Singapore	Phasing in	Climate reporting aligned with IFRS S2 for listed companies. Application delayed for some entities; phased implementation continuing.
Chile, Qatar, Mexico	Mandatory 2026	Chile and Mexico: mandatory ISSB-aligned reporting from the start of 2026 for listed companies. Qatar: mandatory ISSB-aligned reporting from 2026 for banks and insurance companies regulated by the Qatar Central Bank.
China	Developing	Ministry of Finance issued a climate standard based on IFRS S2 in December 2025. Voluntary for now; nationwide framework targeted by 2030.
Canada	Voluntary	CSDS 1 and CSDS 2 aligned with ISSB standards are available for voluntary adoption. Mandatory implementation awaits further regulatory action.
EU / ESRS	Separate framework	The EU uses its own ESRS under the CSRD, not the ISSB standards directly. Interoperability guidance exists. The simplified ESRS enhance alignment with IFRS S1/S2 but significant differences remain (double vs. single materiality).

Jurisdictional variation is substantial — verify before relying

No two jurisdictions have adopted the ISSB standards identically. Transitional reliefs, Scope 3 timelines, SASB industry metric requirements, and assurance expectations all vary. The UK removed time limits on Scope 3 transitional relief. Australia does not require SASB industry metrics. Some jurisdictions mandate only IFRS S2, not S1. The table above reflects information available as of mid-March 2026 and is intended as an orientation guide — adoption status, timelines, and scope may change as national regulatory processes continue. Companies operating across multiple markets must verify each jurisdiction's specific, current requirements against the authoritative local legal texts rather than assuming a single ISSB standard applies universally.

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.

ISSB (IFRS S1 & S2)

• Single (financial) materiality
• Climate-specific standard (S2) + general (S1)
• SASB industry metrics integral
• Scope 3 relief: 1-year transitional deferral
• Climate-first relief in year one
• Investor-focused; decision-useful information
• No mandatory assurance standard
• Jurisdiction-by-jurisdiction adoption

ESRS (under CSRD)

• Double materiality (impact + financial)
• 12 standards covering E, S, G topics
• Sector-specific ESRS eliminated (Omnibus I)
• Scope 3 always required if material
• No climate-first relief
• Broader stakeholder focus
• Limited assurance mandatory (permanent)
• EU-wide; ~1,000+ employee / €450M+ scope (subject to transitional provisions — some Wave 1 companies may be exempt for FY 2025–2026 depending on Member State transposition)

The key finding of the interoperability guidance is that almost all IFRS S2 climate disclosures are included within ESRS E1 (Climate Change). Companies starting with ESRS can largely satisfy IFRS S2 requirements by supplementing their ESRS disclosure with a limited number of additional data points specified in the guidance. The reverse also holds — companies starting with ISSB standards can use ESRS as a source of guidance for sustainability topics beyond climate under IFRS S1. The simplified ESRS (EFRAG technical advice, December 2025 — not yet formally adopted as a delegated act; expected by September 2026) per EFRAG technical advice (not yet formally adopted as a delegated act), aim to further enhance this interoperability, including revising the GHG emissions boundary to the GHG Protocol financial control approach and introducing a fair presentation framework aligned with IFRS S1. Readers should verify the final content of the simplified ESRS delegated act once adopted.

Some simplified ESRS reliefs exceed ISSB standards

While ESRS interoperability with the ISSB is high, some of the reliefs introduced in the simplified ESRS — particularly around "undue cost or effort" exemptions, narrative flexibility, and extended phase-ins — go beyond what the ISSB standards permit. Companies that intend to assert compliance with both frameworks should evaluate the impact of these reliefs on their reported information carefully.

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

In November 2025, the ISSB formally decided to begin standard-setting on nature-related risks and opportunities, covering biodiversity, ecosystems, water, pollution, land use, and resource extraction. In January 2026, the board voted unanimously to anchor the new disclosures within the existing IFRS S1 and S2 framework. The ISSB has stated it is targeting an Exposure Draft by the Convention on Biological Diversity COP17 in October 2026, though this timeline is ambitious and subject to the standard-setting process. The TNFD (Taskforce on Nature-related Financial Disclosures), whose framework is used by over 730 organisations as of November 2025, has announced it will complete its current technical work by Q3 2026 and then support the ISSB's process. Whether the nature-related requirements will take the form of a new standard (sometimes referred to as "IFRS S3"), amendments to existing standards, or application guidance has not yet been decided. A final standard would not be expected before 2027 at the earliest, and jurisdictional adoption would follow on its own separate timeline.

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.

Navigate multi-framework sustainability reporting

Tell us what you are working on. We will respond within 24 hours with a clear perspective on how we can help you move forward.

Book a call →

How to Prepare: A Multi-Jurisdiction Framework

Companies operating across multiple jurisdictions — or those anticipating ISSB adoption in their home market — should begin preparation now, even where requirements are not yet mandatory. Investor expectations, supply chain requirements, and the pace of jurisdictional adoption all point in the same direction.

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 you are subject to both ESRS and ISSB requirements, design your reporting system to satisfy both from a single data collection process. Use the EFRAG-ISSB interoperability guidance (May 2024) to map overlaps and identify the limited number of supplementary disclosures needed. This avoids duplication and reduces the total cost of compliance.

Frequently Asked Questions

Are IFRS S1 and S2 mandatory?

It depends on your jurisdiction. The ISSB sets standards but does not mandate adoption. As of early 2026, over 20 jurisdictions have adopted the standards on a mandatory or voluntary basis, with more finalising adoption roadmaps. Check your specific jurisdiction's requirements — the IFRS Foundation publishes jurisdictional profiles tracking each country's approach.

What is the difference between ISSB and ESRS?

The most fundamental difference is materiality. ISSB uses single (financial) materiality — what affects the entity's financial prospects. ESRS uses double materiality — both the entity's financial prospects and its impacts on people and the environment. There is high alignment on climate disclosures, and interoperability guidance exists for companies subject to both. See our ESRS guide for details on the EU framework.

Is Scope 3 still required under IFRS S2?

Yes. Scope 3 emissions are required where material, covering all 15 GHG Protocol categories. The December 2025 amendments provided targeted relief for financial institutions regarding Category 15 (investments) — specifically, entities may limit reporting to financed emissions and exclude facilitated and insurance-associated emissions. A one-year transitional relief on Scope 3 remains available in the first year of reporting.

Do I need to use the SASB Standards?

IFRS S2 requires entities to consider the SASB industry-based metrics when identifying climate-related disclosures. IFRS S1 references SASB as a source of guidance for beyond-climate sustainability topics. However, some jurisdictions (notably Australia) have removed the SASB requirement from their national standards. Check your jurisdiction's specific adaptation.

Can I comply with both ISSB and ESRS simultaneously?

Yes, with careful planning. The EFRAG-ISSB interoperability guidance (May 2024) demonstrates that almost all IFRS S2 climate disclosures are covered by ESRS E1. Companies starting with either framework can supplement with a limited number of additional disclosures to satisfy the other. However, some simplified ESRS reliefs go beyond what ISSB permits, so dual compliance requires evaluating the impact of each relief on reported information.

When will nature-related (IFRS S3) standards be issued?

The ISSB formally began standard-setting on nature-related risks and opportunities in late 2025 and has stated it is targeting an Exposure Draft by the Convention on Biological Diversity COP17 in October 2026. The final form — whether a new standard, amendments to S1, or application guidance — has not been decided. A final standard is unlikely before 2027 at the earliest, and jurisdictional adoption would follow on separate, jurisdiction-specific timelines. There is no immediate compliance obligation arising from this project; companies should monitor developments while continuing to use the TNFD framework as a voluntary basis for nature-related reporting under IFRS S1.

What assurance is required?

The ISSB standards themselves do not prescribe assurance requirements — this is determined by each jurisdiction. Most jurisdictions adopting ISSB standards are requiring or planning limited assurance. Australia has introduced a phased assurance model. The UK's approach is being developed by the FCA. The international reference standard for sustainability assurance is ISSA 5000, finalised by the IAASB in 2024.

Conclusion

The ISSB standards are establishing themselves as the global baseline for sustainability disclosure — not by regulatory mandate from a single authority, but through the cumulative weight of jurisdictional adoption across more than 30 countries. For companies that operate internationally, the question is no longer whether they will encounter these standards, but in how many jurisdictions and under what variations.

The next twelve months will be consequential. The UK is moving toward mandatory adoption for listed companies. Australia's Group 2 entities begin reporting. The nature-related exposure draft will signal the next expansion of the ISSB's scope. And the simplified ESRS will be formally adopted, clarifying the interoperability landscape for dual-framework companies. Companies that invest now in GHG measurement infrastructure, financial materiality assessments, and interoperable reporting systems will be positioned to meet whatever combination of jurisdictional requirements applies to them — efficiently, and without duplication.

Disclaimer: This article is intended as a practical orientation guide, not legal advice. It reflects information available as of mid-March 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. Key elements in motion include: UK FCA rulemaking on mandatory adoption (consultation closing March 2026), the ISSB's nature-related Exposure Draft (targeted October 2026), the European Commission's simplified ESRS delegated act (expected by September 2026), and ongoing jurisdictional adoption decisions in Canada, China, and elsewhere. Readers should verify jurisdiction-specific requirements against the authoritative legal texts in their markets and seek qualified legal counsel before making compliance decisions. Futureproof Solutions monitors regulatory developments continuously and updates this guidance accordingly.