The International Sustainability Standards Board (ISSB) has reduced the so-called ‘alphabet soup’ of sustainability-related financial disclosure standards and frameworks, and garnered international support to create a global baseline of disclosures for global capital markets. 

The ISSB designed the IFRS Sustainability Disclosure Standards to enhance investor–company dialogue by consolidating and aligning the resources of other investor-focused initiatives, such as the Climate Disclosure Standards Board (CDSB), the Value Reporting Foundation and the Task Force for Climate-related Financial Disclosures (TCFD). 

After the ISSB issued its inaugural IFRS Sustainability Disclosure Standards—IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures—the Financial Stability Board asked the IFRS Foundation to take over from the TCFD the monitoring of progress on climate-related disclosures.

Companies and investors are seeking clarity and guidance on the many standards and frameworks used to disclose sustainability-related financial information.​ IFRS Sustainability Disclosure Standards enable companies and investors to standardise on a single global baseline of sustainability disclosures for capital markets.

A company that applies IFRS S1 and IFRS S2 will meet the TCFD recommendations (and more) and support investors’ decision-making better by providing, as robust inputs for decision, comparable and assurable climate-related information. IFRS S1 and IFRS S2 integrate and build upon the TCFD recommendations, reducing the implementation efforts and learning curve for a company that is already familiar with the TCFD recommendations. 

A company benefits from applying the IFRS Sustainability Disclosure Standards because they:  

• are built upon the known and widely used TCFD recommendations;
• require the company to disclose only information that is material, proportionate and decision-useful to investors;
• enable interoperability with other sustainability reporting frameworks by helping the company streamline its sustainability reporting processes and disclosures; 
• require the company to enhance transparency and comparability of information about the company’s governance, strategy and risk management, resulting in improved access to and lower cost of capital for the company; and 
• reduce confusion, costs and complexity for the company and for the capital markets, which rely on robust information to function effectively.

IFRS S1 and IFRS S2 are designed to be applied together and alongside and future IFRS Sustainability Disclosure Standards.  

IFRS S1 sets out overarching disclosure requirements designed to enable a company to communicate to investors the sustainability-related risks and opportunities it faces over the short, medium and long term. IFRS S1 establishes the conceptual foundations of sustainability-related financial information and prescribes specific requirements for how a company discloses such information, including location of disclosures, timing of reporting, judgements, uncertainties and errors.

For example, IFRS S1 sets out requirements on how a company aggregates and disaggregates information the company discloses in accordance with IFRS S2.  

IFRS S1 might require a company to disclose information beyond the climate-related disclosures recommended by the TCFD and prescribed by IFRS S2.

The requirements in IFRS S2 integrate, and are consistent with, the TCFD’s four core recommendations and 11 recommended disclosures, with minor differences. 

This IFRS S2–TCFD comparison table [updated November 2024] summarises differences between IFRS S2 and the TCFD recommendations. As demonstrated in the table, a company that applies IFRS Sustainability Disclosure Standards will meet the TCFD recommendations (and more). Therefore, a company does not need to apply the TCFD recommendations in addition to IFRS Sustainability Disclosure Standards.

IFRS S2 does require a company to make disclosures above and beyond those required by the TCFD recommendations. For example, IFRS S2 requires a company to disclose:

• industry-based metrics.
• information about its planned use of carbon credits to achieve its net emissions targets.
• additional information about its targets and financed emissions.
• scope 3 greenhouse gas (GHG) emissions, including information about measurement approach, inputs and assumptions used in measuring the emissions. IFRS S2 also sets out a scope 3 measurement framework as guidance for the company to prepare its scope 3 GHG emissions disclosures.

• Read and explore IFRS S1 and IFRS S2.
• Use the IFRS S2–TCFD comparison table [updated November 2024] to identify gaps between the disclosure requirements of the TCFD recommendations and IFRS S2.
• Take action to fill any gaps identified between your current climate-related disclosures and IFRS S2’s requirements.
  
• Assess whether you need to change your company’s governance, risk management, strategy or reporting to comply with IFRS S1 and IFRS S2.
  
• Assess whether you need to make any changes to the timing of your disclosures. IFRS S1 requires a company to publish financial statements and sustainability disclosures at the same time. However, IFRS S1 grants a transitional relief in the first year a company prepares sustainability disclosures in accordance with IFRS S1.