Mapping TCFD to the IFRS S2 on Climate Disclosures

Below is an excerpt from ISS-Corporate’s recently released paper “Mapping TCFD to the IFRS S2 on Climate Disclosures.” The full paper is available for download from the ISS-Corporate online library.

The inaugural IFRS Sustainability Disclosure Standards were released by theInternational Sustainability Standards Board (ISSB) in mid-2023, designed to establish a global baseline for corporate disclosures. They are set to be adopted across several jurisdictions in the next few years. The new rules have garnered global support from 64 jurisdictions to date, with 19 national regulators already consulting on adoption of the recommendations under jurisdictional law.

The IFRS S2 Climate-related Disclosures rules are based on the architecture and recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). TCFD has defined climate reporting globally since the release of its recommendations in 2017. According to ISS data, 78% of companies on the S&P 500, 82% on the STOXX 600 and 98% on the FTSE 100 provide climate disclosures informed by TCFD. As an indication of its success, TCFD has now been disbanded, with the ISSB taking over the responsibility for monitoring the continued progress of climate-related disclosures.

Whilst based on TCFD, IFRS S2 significantly expands the scope and detail of disclosures required. To assess the concrete implications of this progression,ISS-Corporate performed a detailed cross-standard analysis, asking two key questions: What are the additional disclosures required under IFRS S2? And how well do exemplary climate reports align with IFRS S2?Our analysis found that:

1. Well over three-quarters of IFRS S2 cross-industry disclosure requirements exceed the TCFD recommendations.
2. Even leaders in climate reporting (according to current standards like TCFD) will need to significantly enhance data gathering and disclosure to achieve IFRS S2 alignment, as best-in-class existing disclosures currently meet just over 50% of IFRS S2 cross-industry disclosure requirements.

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