What is IFRS S2?
The objective of IFRS S2 is to require an entity to disclose information about climate-related risks and opportunities that could reasonably be expected to affect its cash flows, its access to finance or its cost of capital over the short, medium or long term1.
This is "enterprise value" materiality — the same investor-focused lens used across the IFRS S1 and S2 framework.
The four pillars of IFRS S2
IFRS S2 adopts the four-pillar architecture established by the Task Force on Climate-related Financial Disclosures (TCFD)5.
- Governance — the board and management processes used to oversee climate-related risks and opportunities
- Strategy — the climate-related risks and opportunities identified, their effects on the business model, and the resilience of the strategy
- Risk management — how climate-related risks are identified, assessed, prioritised and monitored
- Metrics and targets — greenhouse-gas emissions, cross-industry and industry-based metrics, and climate-related targets
This is the same structure used by UK SRS S2 and by the wider TCFD framework, which keeps climate disclosure consistent as companies move between regimes1.
Scenario analysis under IFRS S2
A key difference from the original TCFD recommendations is that IFRS S2 makes climate-related scenario analysis a requirement, not just a recommendation1.
Entities must use climate-related scenario analysis to assess the resilience of their strategy and business model, using an approach commensurate with their circumstances1.
The standard points to scenarios consistent with the latest international agreement on climate change, which in practice means Paris-aligned pathways1.
Scope 1, 2 and 3 emissions under IFRS S2
IFRS S2 requires disclosure of absolute gross Scope 1, 2 and 3 greenhouse-gas emissions, measured in accordance with the GHG Protocol Corporate Standard1.
Scope 3 — value-chain emissions — is often the largest and hardest part of the inventory; our Scope 3 under UK SRS guide explains the fifteen categories and how to measure them.
Companies preparing these figures typically use carbon reporting software to apply emission factors and produce an auditable Scope 1-3 inventory.
IFRS S2 also provides transition reliefs in the first annual reporting period, including relief from disclosing Scope 3 emissions and from providing comparatives1.
Key paragraph-level requirements — 10, 29(a) and 29(f)
Preparers often navigate the standard6 by paragraph number.
Three paragraphs attract the most questions in practice.
Paragraph 10 — climate-related risks and opportunities. Within the strategy pillar, paragraph 10 requires an entity to describe the climate-related risks and opportunities that could reasonably be expected to affect its prospects6.
For each, the entity explains whether it is a physical or transition risk and specifies the time horizons — short, medium or long term — over which its effects could occur6.
Paragraph 29(a) — greenhouse-gas emissions. This is the Scope 1, 2 and 3 requirement: absolute gross emissions for the reporting period, in metric tonnes of CO2 equivalent, measured in accordance with the GHG Protocol Corporate Standard unless a jurisdiction requires a different method6.
Paragraph 29(f) — internal carbon prices. An entity discloses whether and how it applies a carbon price in decision-making, and the price per metric tonne of CO2 equivalent used6.
The same paragraph numbering carries into the UK standard — our UK SRS four pillars guide works through the full paragraph 29 metrics list.
IFRS S2 vs TCFD
IFRS S2 consolidates and supersedes the voluntary TCFD recommendations, which is why the four pillars look familiar5.
| Feature | TCFD | IFRS S2 |
|---|---|---|
| Status | Voluntary recommendations | Mandatory standard (where adopted) |
| Scenario analysis | Recommended | Required |
| Scope 3 emissions | Encouraged | Required (with first-year relief) |
| Industry guidance | Supplemental | Industry-based requirements built in |
| Future | Being superseded | The global baseline |
For the detailed mapping, see our UK SRS vs TCFD comparison.
IFRS S2 vs UK SRS S2
The UK has adopted IFRS S2 as UK SRS S2, published by DBT on 25 February 20262.
UK SRS S2 keeps the substance of IFRS S2 but applies UK-specific amendments — including a reworked climate-first transition relief and adjusted effective dates — alongside the wider set of six amendments to the IFRS S1 and S2 package2.
The practical effect is that a company applying IFRS S2 is substantially aligned with UK SRS S2, with the differences mattering mainly for first-year reliefs and UK timing2.
IFRS S2 in the UK — effective date and scope
Globally, IFRS S2 is effective for annual reporting periods beginning on or after 1 January 2024 for jurisdictions and companies that adopt it1.
In the UK, IFRS S2 applies through UK SRS S2 — the UK-endorsed version of the standard2.
Under FCA CP26/5, UK SRS S2 reporting is proposed mandatory for in-scope listed companies from accounting periods beginning on or after 1 January 2027, with Scope 3 on a comply-or-explain basis in the first year4.
The FCA's final policy statement is expected in autumn 2026, with UK SRS S1 following on a comply-or-explain basis from 20294.
For the differences between the two versions, see UK SRS vs IFRS S1/S2; for the combined framework, see IFRS S1 and S2.
Companies not yet in mandatory scope can still report against IFRS S2 voluntarily to prepare for the UK regime and to meet investor expectations2.
What is IFRS S2?
IFRS S2 is the ISSB's Climate-related Disclosures standard, issued on 26 June 2023 and effective for annual reporting periods beginning on or after 1 January 2024. It requires companies to disclose climate-related risks and opportunities across four pillars — governance, strategy, risk management, and metrics and targets — including Scope 1, 2 and 3 emissions and mandatory scenario analysis.
What does IFRS S2 paragraph 10 require?
Paragraph 10 sits in the strategy pillar. It requires an entity to describe the climate-related risks and opportunities that could reasonably be expected to affect its prospects, state whether each is a physical or transition risk, and specify the time horizons over which the effects could occur.
Does IFRS S2 require internal carbon price disclosure?
Yes. Paragraph 29(f) requires an entity to disclose whether and how it applies an internal carbon price in decision-making, and the price per metric tonne of CO2 equivalent used.
What does IFRS S2 require for emissions?
IFRS S2 requires disclosure of absolute gross Scope 1, 2 and 3 greenhouse-gas emissions measured under the GHG Protocol Corporate Standard. There is a first-year transition relief from disclosing Scope 3 emissions.
Is scenario analysis mandatory under IFRS S2?
Yes. Unlike the original TCFD recommendations, IFRS S2 requires climate-related scenario analysis to assess the resilience of an entity's strategy, using an approach commensurate with its circumstances and scenarios consistent with the latest international climate agreement.
What is the difference between IFRS S2 and TCFD?
IFRS S2 builds on the TCFD four-pillar framework but is a mandatory standard (where adopted), makes scenario analysis required rather than recommended, requires Scope 3 emissions, and embeds industry-based requirements. TCFD is being superseded by IFRS S2.
Is IFRS S2 mandatory in the UK?
Not directly. The UK adopted IFRS S2 as UK SRS S2. UK SRS S2 is proposed mandatory for listed companies from 1 January 2027 under FCA CP26/5, subject to the final FCA policy statement.
When did IFRS S2 become effective?
IFRS S2 is effective for annual reporting periods beginning on or after 1 January 2024 for adopting companies and jurisdictions. UK application runs through UK SRS S2 on UK-specific timing.
