Highlights
Stakeholders – including regulators, preparers and investors – have provided feedback about potential areas of clarification that would support implementation of IFRS S2 Climate-related Disclosures. In response, the International Sustainability Standards Board (ISSB) decided in its meeting on 29 January to propose a set of narrow-scope amendments to IFRS S2.
The amendments cover the following:
- disclosing Scope 3 Category 15 greenhouse gas (GHG) emissions (i.e. GHG emissions that arise from a company’s financial investments);
- using alternative global warming potential (GWP) values;
- applying the jurisdictional relief to use a method other than the GHG Protocol Corporate Standard to measure GHG emissions; and
- using the Global Industry Classification Standard (GICS) when disaggregating financed emissions by industry.
The proposed amendments are particularly relevant for companies with insurance or investment banking activities. They will also be of interest to companies that are currently planning their implementation or have already conducted a gap assessment.
What changes are being proposed?
The ISSB is proposing the following changes to IFRS S2.
| Area | What's proposed? | What's the impact? |
Disclosing Scope 3 Category 15 GHG emissions For more information, see Financed and facilitated emissions | Limit the disclosure of Scope 3 Category 15 GHG emissions to financed emissions as defined in IFRS S2 and specifically exclude derivatives. IFRS S2 defines financed emissions as ‘the portion of gross greenhouse gas emissions of an investee or counterparty attributed to the loans and investments made by an entity to the investee or counterparty’. Require a company to provide information about what was excluded. | A company would not need to include the following emissions in its total Scope 3 emissions, even if they are material:
The relief would not be time-bound, but the ISSB may reconsider its decision at a future date if circumstances change – e.g. if there are changes to the GHG Protocol Corporate Standard1 affecting Scope 3 Category 15 emissions. There would be no change to the requirement for all types of companies – e.g. insurers – to disclose financed emissions, if material. |
| Using alternative GWP values in certain circumstances | Allow a company to use the GWP values required by its local regulator or stock exchange instead of GWP values from the latest Intergovernmental Panel on Climate Change (IPCC) assessment. | A company would no longer have to use two sets of GWP values – one to meet IFRS S2 requirements and the other to meet local jurisdictional needs. Irrespective of the proposals, a company would still be required to disclose the measurement approach, inputs and assumptions it has used to measure its GHG emissions which would include explaining:
The relief would be available as long as the regulator or stock exchange requires the company to use alternative GWP values. |
| Relief from using a method other than the GHG Protocol Corporate Standard to measure GHG emissions | Clarify the circumstances in which a company can use the jurisdictional relief that applies if a method other than the GHG Protocol Corporate Standard is required by a local regulator or stock exchange. | A parent entity applying IFRS S2 would be permitted to consolidate information from a part of its group, that is prepared using a different measurement method for GHG emissions (as required by its local regulator or stock exchange). The parent is also permitted to continue using a different method for its entire group if that method is mandated by its jurisdiction. The proposals would reduce duplicate reporting for companies with subsidiaries in jurisdictions with different GHG emissions measurement requirements. |
| Using the GICS when disaggregating financed emissions by industry | Introduce a hierarchy to explain which classification system to use for lending and investment activities. a) If a company is currently using GICS somewhere in the group, they would use it for the whole group. Under this hierarchy, if a company is using more than one industry-classification system, the proposals would require that it chooses one classification system – prioritising a system that is used for:
Require a company to disclose the industry-classification system it is using and if it is not GICS, then explain the basis for selecting the alternative classification system. | A company would be able to use its existing industry-classification system instead of GICS in specific circumstances when providing disaggregated information about its financed emissions. The proposals would be particularly beneficial for companies that are already required to use a different classification system for prudential regulatory reporting, or those that for various reasons already, use a different system to GICS. |
What’s next?
The ISSB plans to release an exposure draft for public consultation in Q2 2025 for a 60-day comment period. The board intends to finalise the amendments during 2025 and propose an effective date as soon as possible (e.g. 1 January 2026, with early adoption permitted) to ensure that companies have time to adjust systems and avoid unnecessary work as they continue to implement the standards.
Actions for management – Have your say when the consultation opens
- Understand the ISSB's proposals and how they affect your company.
- Be ready to update your gap assessment if already completed, or ensure the proposed changes are considered as you perform your gap assessment.
- Consider whether planned changes would be required to your systems, processes and controls.
- Remember that these proposals are intended to simplify, but not remove requirements. Financed emissions disclosures are still required for companies such as insurers.
- Have your say when the consultation opens. For further information on the proposals, speak to your KPMG contact and visit kpmg.com/ifrs to keep up to date with the latest news and discussion.
1 The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004) (the GHG Protocol Corporate Standard).
© 2025 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.