The IFRS Foundation has published significant implementation guidance clarifying how entities should disclose information regarding climate transition plans under IFRS S2 Climate-related Disclosures. This guidance addresses a critical area for investors seeking comparable information on companies’ strategies to manage climate-related risks and opportunities.
Key Aspects of the New Guidance:
- Alignment with IFRS S2: Provides practical support for entities applying the existing climate disclosure requirements within IFRS S2, specifically concerning the disclosure of transition plans if such plans are undertaken.
- Enhancing Disclosure Quality: Aims to help entities produce more useful, decision-relevant, and reliable information about their climate transition strategies, regardless of whether plans focus on mitigation (emissions reduction) or adaptation (building resilience).
- Defining “Climate Transition”: Explicitly clarifies that a climate transition refers to the strategic actions, targets, and resource allocation a company employs to achieve its climate goals and manage associated risks and opportunities.
- Content Guidance: Advises entities on the specific disclosures required if they have adopted a climate transition plan, detailing the information needed to explain their strategy for transitioning towards a lower-carbon or climate-resilient business model.
- Complementary Framework: Designed to work alongside other jurisdictional or international frameworks specifying climate transition plan content (e.g., leveraging work from the Transition Plan Taskforce, which the IFRS Foundation assumed responsibility for in 2024).
- Jurisdictional Flexibility: Explicitly confirms that jurisdictions adopting IFRS S2 can require additional disclosures beyond the standard (like specific alignment with 1.5°C pathways), provided such requirements do not conflict with or obscure the core IFRS S2 disclosures.
- Non-Prescriptive on Plans: Reiterates that IFRS S2 does not mandate entities to create a climate transition plan. It mandates disclosure of material climate-related risks and opportunities affecting the entity, including how these are managed. If a transition plan is part of that management strategy, it must be disclosed.
Scope and Status:
- This guidance does not amend or add new requirements to IFRS S2 itself. It provides interpretative support for applying the existing standard.
- The IFRS Foundation will actively monitor the application of this guidance and undertake a formal review process in the future, potentially leading to updates if necessary.
Source: IFRS Foundation, 23 June 2025.