What is “IFRS S2 Climate-related disclosures”?

The International Financial Reporting Standards (IFRS) Climate-related Disclosures (IFRS S2) sets out the requirements for disclosing information about an entity’s climate-related risks and opportunities. In particular, IFRS S2 requires an entity to disclose information that enables users of general purpose financial reports to understand:

• the governance processes, controls and procedures the entity uses to monitor, manage and oversee climate-related risks and opportunities;
• the entity’s strategy for managing climate-related risks and opportunities;
• the processes the entity uses to identify, assess, prioritize and monitor climate-related risks and opportunities, including whether and how those processes are integrated into and inform the entity’s overall risk management process; and
• the entity’s performance in relation to its climate-related risks and opportunities, including progress towards any climate-related targets it has set, and any targets it is required to meet by law or regulation.

Which jurisdictions have adopted or plan to adopt IFRS S2?

As of December 19, 2024, 31 countries have introduced or are in the process of introducing IFRS S2, including Canada.

Where does Canada stand?

The Canada Climate Law Initiative is pleased that the Canadian Sustainability Standards Board (CSSB) issued its final sustainability and climate-related reporting standards in December 2024.

CSDS 1 General Requirements for Disclosure of Sustainability-related Financial Information and CSDS 2 Climate-related Disclosures are aligned with the International Sustainability Standards Board (ISSB) global baseline disclosure standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, with specific modifications for Canadian context, including a later effective date and additional transition reliefs.

“It is an important step towards advancing harmonization and comparability and aligning Canada’s efforts with the global baseline. However, we are disappointed to see the CSSB has included an additional year for the reporting of scope 3 emission, which make up a significant part of many Canadian entities’ total emissions inventory,” wrote Sonia li Trottier.

Canada’s standards are voluntary. We would like to see an increased uptake in the number of Canadian businesses adopting these standards.

Additionally, we are waiting on the Canadian Securities Administrators to revise and finalize National Instrument Climate-related Matters (NI 51-107). Once this happens, provinces and territories will determine whether Canada’s standards should be mandated, and if so, who will need to apply the standards and over what time frame.

What comes next?

ISSB Chair Emmanuel Faber said: “Further action is needed to address the fact investors are still not receiving the information they need to assess and price appropriately climate and other sustainability-related risks and opportunities. Through jurisdictional initiatives and the voluntary choices companies are making, often in response to investor demand, we continue to see momentum build.

The introduction of sustainability-related disclosure requirements into regulatory frameworks through the adoption or other use of ISSB Standards, building on the strong foundations laid through the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and progressing towards a more comprehensive and assurable set of requirements, is of vital importance for the healthy functioning of capital markets around the world.”