What the ISSB changed in IFRS S2 and why it matters now
In December 2025, the International Sustainability Standards Board (ISSB) issued targeted amendments to IFRS S2 Climate-related Disclosures. These changes address specific implementation challenges that companies, financial institutions, and regulators had flagged since the standard was first published in 2023.
The IFRS S2 GHG amendments do not rewrite the standard. They clarify scope, reduce unnecessary burdens, and align measurement flexibility with real-world regulatory constraints. For companies currently planning their sustainability reporting strategy for 2026 and 2027, understanding these changes is not optional.
The amendments take effect for annual reporting periods beginning on or after 1 January 2027. Early application is permitted, which means companies with mature sustainability reporting functions can benefit from the relief immediately, rather than waiting.
Timing matters: the amendments arrive in the same month the EU published the Omnibus Directive simplifying CSRD and CSDDD requirements. Companies reviewing their sustainability reporting obligations across both IFRS and European frameworks now have more clarity from both directions simultaneously.
Three areas received targeted changes: scope 3 category 15 financed emissions, GHG measurement methods and GWP values under jurisdictional requirements, and the industry classification system used for financed emissions disaggregation.
Scope 3 category 15: what the financed emissions relief covers
The most significant change concerns scope 3 category 15 emissions, which covers financed and facilitated emissions attributable to a company’s loans, investments, and financial activities.
Before the amendments, the boundary of what had to be reported under category 15 was ambiguous. Financial institutions faced uncertainty about whether facilitated emissions from investment banking activities, insurance-associated emissions from underwriting, and emissions linked to derivatives all fell within scope. This drove significant data collection costs and inconsistent disclosures across the market.
The amendments clarify the boundary directly. Companies may now limit their category 15 reporting to emissions attributable to their loans and investments, and for asset managers, to assets under management. Facilitated emissions, insurance-associated emissions from underwriting, and derivatives are explicitly excluded from mandatory reporting. Where exclusions are applied, the company must describe what was excluded and why.
One additional requirement was introduced to preserve investor comparability: entities that report category 15 must separately disclose the financed emissions subtotal within the total category 15 figure. This means investors can still see the relevant financed emissions data, while companies are no longer obligated to collect data on activities beyond their core lending and investment books.
For non-financial companies, the direct impact of this change is limited. Category 15 applies primarily to financial institutions such as banks, insurers, pension funds, and asset managers. However, if your company holds significant investment portfolios or is part of a financial group, the relief is relevant to your consolidated sustainability reporting approach.
Jurisdictional GHG methods and classification flexibility
The second set of amendments resolves a structural conflict between IFRS S2 and national regulatory requirements in several major economies.
IFRS S2 originally required companies to use GHG measurement methods aligned with the GHG Protocol Corporate Standard and GWP values from the IPCC Assessment Report. However, jurisdictions including Australia, China, France, Japan, South Korea, and Taiwan mandate the use of national measurement schemes that differ from these international defaults.
The amendments confirm that companies operating under jurisdictional requirements may apply locally mandated measurement methods and GWP values. This relief applies at entity level or at the level of a specific subsidiary operating in a particular jurisdiction, and remains in force for as long as the jurisdictional requirement applies.
For EU-based companies, this is directly relevant. European subsidiaries of global groups may now align their IFRS S2 disclosures more closely with their existing ESRS E1 reporting methodology, reducing the risk of contradictory emissions figures across different regulatory reports. The ISSB and the European Commission have been working toward interoperability between these frameworks. Dcycle has covered how ESRS and IFRS S2 work together in practice, and these amendments strengthen the case for a unified data collection approach.
The third amendment addresses a technical constraint on financed emissions disaggregation. IFRS S2 originally required the use of the Global Industry Classification Standard (GICS) to break down financed emissions by sector. European financial institutions already working with NACE-based sector classifications in their ESRS E1 disclosures now have explicit permission to use alternative systems, provided they disclose which classification they apply. This removes a significant operational barrier to IFRS S2 compliance for European financial groups.
What companies should prioritise before 2027
The 2027 effective date creates a planning window that companies should use deliberately. Several practical steps apply regardless of sector.
Audit your scope 3 category structure. Even if category 15 does not apply to your business, the amendments signal that implementation feedback shapes standards over time. If you have been deferring scope 3 data collection due to complexity, the amendments make IFRS S2 more tractable, not less necessary. Categories 1 through 14 remain unchanged and cover the supply chain emissions that most companies need to measure.
Map your GHG measurement methods against jurisdictional requirements. If your operations span multiple jurisdictions, identify where local regulations require different GWP values or measurement approaches. Document the conflict and the relief you intend to apply under the amended standard. Auditors will expect this documentation.
Evaluate early adoption. The amendments are available immediately for companies that choose to apply them. If your sustainability report is due in 2026 and you are voluntarily reporting under IFRS S2, early adoption of the relief provisions may reduce your workload this cycle.
Build a single emissions dataset for ESRS and IFRS S2. The jurisdictional flexibility reduces technical conflicts between the two frameworks. Companies using automated data collection can build one emissions dataset that satisfies both ESRS E1 and IFRS S2 requirements, rather than maintaining separate inputs for parallel reporting obligations. This is where the real efficiency gain lies.
For practical guidance on how ESRS requirements interact with international standards, the CSRD Resource Hub provides detailed analysis across materiality, data collection, and reporting workflows.
Looking ahead: the direction of climate disclosure does not change
The ISSB’s decision to issue targeted amendments within two years of publishing IFRS S2 reflects a pragmatic response to real implementation challenges. The standard is not being weakened. The boundaries around financed emissions are now clearer. The measurement flexibility accommodates legitimate jurisdictional diversity. The classification relief removes an unnecessary operational constraint.
What the amendments do not change is the fundamental expectation: companies are expected to measure, disclose, and continuously improve their GHG emissions reporting. The relief measures reduce the cost of compliance without reducing the expectation of transparency.
The convergence between IFRS S2, ESRS, and the GHG Protocol continues. The ISSB’s own December 2025 amendments acknowledge the need to accommodate national regulatory realities while maintaining global comparability. Companies that invest now in flexible, framework-agnostic emissions measurement infrastructure will be better positioned as these standards continue to evolve.
For companies mapping their sustainability reporting obligations for 2026 and 2027, request a demo of the Dcycle platform to see how a single data layer can satisfy both IFRS S2 and CSRD requirements. Further analysis on scope 1, 2, and 3 measurement is available in the carbon footprint reporting collection.
