IFRS Foundation Issues Climate Disclosure Guidance

In a significant step toward global consistency in climate-related financial disclosures, the IFRS Foundation has released comprehensive new guidance to assist companies in reporting high-quality, comparable transition-related information in alignment with the IFRS S2 Climate-related Disclosures standard. The guidance aims to improve how entities communicate their climate transition plans and strategies, thereby supporting investors, regulators, and other stakeholders with reliable and actionable information.

The guidance is part of the IFRS Foundation’s broader effort to enhance the quality and consistency of sustainability disclosures and forms a key component of the work undertaken by the International Sustainability Standards Board (ISSB). Sue Lloyd, Vice-Chair of the ISSB, emphasized the practical value of the new guidance, stating that it addresses the existing fragmentation in disclosures related to transition planning. According to her, this fragmentation is not only burdensome for companies preparing the information but also limits its usefulness for investors seeking to evaluate climate-related risks and opportunities.

Although IFRS S2 does not mandate that companies must have a transition plan, it does require them to disclose material sustainability-related risks and opportunities. This includes information about how companies are addressing or planning to address climate-related challenges and opportunities in the short, medium, and long term. The newly released guidance is meant to support the implementation of IFRS S2 by providing a clear framework for entities to disclose relevant information related to their transition strategies without altering the existing requirements of the standard.

One of the core elements of the guidance is its alignment with existing global and national frameworks, particularly the work of the UK’s Transition Plan Taskforce (TPT). The IFRS Foundation assumed responsibility for the TPT’s framework in 2024 and has since built on its methodologies to ensure full compatibility with the ISSB’s global baseline for sustainability reporting. This alignment is critical, as it ensures that entities preparing disclosures for both domestic and international audiences can do so without duplicating effort or providing inconsistent information.

The guidance outlines several areas of focus for climate transition disclosures. Companies are encouraged to articulate how their transition processes are integrated into their broader business strategies. This includes disclosing any targets, plans, or strategies aimed at reducing greenhouse gas (GHG) emissions, improving climate resilience, or achieving other sustainability objectives. The IFRS Foundation has also emphasized that disclosures should capture not only mitigation efforts but also adaptation strategies—reflecting the dual nature of the global climate response.

Additionally, the guidance introduces the concept of jurisdictional flexibility, enabling local authorities and regulators to supplement the core ISSB disclosures with additional reporting requirements that reflect local stakeholder expectations. For example, jurisdictions may require companies to align their GHG reduction targets with the global goal of limiting warming to 1.5°C, as established by the Paris Agreement. This approach ensures that while there is consistency in the core information being disclosed across jurisdictions, there is also room for regional specificity and relevance.

Importantly, the document aims to serve as both a support tool and a source of inspiration for companies at different stages of developing their transition plans. While some companies may already have detailed roadmaps in place, others may still be assessing their climate-related risks and formulating strategies. The IFRS Foundation’s guidance provides scalable and adaptable recommendations to assist all types of entities in navigating this process.

To further promote adoption and understanding, the IFRS Foundation has also launched free e-learning modules that support the application of the ISSB Standards, including IFRS S2. These resources are intended to help stakeholders—from corporate reporters to investors and regulators—build the capacity needed to implement the standards effectively.

The IFRS Foundation has made it clear that the guidance is not static. The organization will closely monitor how companies apply the guidance and will consider updates or revisions in line with its formal due process. This adaptive approach ensures that the guidance remains relevant in the context of evolving climate science, stakeholder expectations, and regulatory developments.

In urging jurisdictions and entities to adopt the new framework, the IFRS Foundation highlighted the importance of providing transparent, consistent, and comparable information about transition plans. As global financial systems and economies accelerate their efforts to address climate change, robust disclosure standards such as IFRS S2—and the practical guidance supporting its implementation—will play a central role in ensuring that capital is efficiently allocated to sustainable and resilient activities.

By delivering a clear roadmap for transition-related disclosures, the IFRS Foundation’s new guidance marks a pivotal moment in the evolution of global sustainability reporting. It reinforces the ISSB’s vision of a harmonized global baseline and empowers companies to communicate their climate strategies more effectively to stakeholders worldwide.