Home Updates IAE Explains Reducing Complexity in Climate Reporting: ISSB’s Latest IFRS S2 Amendments

Reducing Complexity in Climate Reporting: ISSB’s Latest IFRS S2 Amendments

The International Sustainability Standards Board (ISSB) has issued targeted amendments to the greenhouse gas (GHG) emissions disclosure requirements under IFRS S2 Climate-related Disclosures to improve the practicality and ease of implementation of climate-related reporting. The amendments were finalised and issued in December 2025 following stakeholder feedback and consultation on operational challenges associated with complex GHG emissions disclosures, particularly relating to Scope 3 Category 15 and financed emissions reporting.

The amendments will become effective for annual reporting periods beginning on or after 1 January 2027, with early adoption permitted.

The changes introduce greater flexibility in selected areas of GHG emissions reporting, particularly for organisations with extensive value chains and financed or investment-related activities. Key amendments include:

permitting entities to limit Scope 3 Category 15 disclosures to financed emissions;

  • allowing the use of industry classification systems* other than GICS for financed emissions disclosures;
  • clarifying the availability of jurisdictional reliefs where alternative GHG measurement methodologies are required by regulators or exchanges; and
  • permitting the use of alternative global warming potential (GWP) values where required under local regulatory frameworks.

The amendments are expected to reduce implementation costs and operational burden by providing practical reliefs and clarification on complex GHG reporting requirements, while maintaining the usefulness of climate-related information for investors and stakeholders. Financial institutions, including banks, insurers, and investment firms, as well as organisations with extensive supply chains or significant climate-related reporting obligations in sectors such as energy, manufacturing, transportation, and consumer products, are expected to benefit most from these amendments.

The amendments do not change Malaysia’s phased implementation timeline under the National Sustainability Reporting Framework (NSRF) adopted by Bursa Malaysia and the Securities Commission Malaysia.

*Examples of recognised industry classification systems include GICS (Global Industry Classification Standard), ICB (Industry Classification Benchmark), NAICS (North American Industry Classification System), SIC (Standard Industrial Classification), NACE (Statistical Classification of Economic Activities in the European Community), ISIC (International Standard Industrial Classification), and sector classification frameworks used under PCAF and the EU Taxonomy.

IA Essential’s multidisciplinary approach that integrates governance, risk management, sustainability reporting, and internal audit expertise can help organisations to better prepare for the evolving sustainability reporting landscape and the implementation of NSRF and IFRS S1 and IFRS S2 requirements through:

  • ESG readiness and gap assessments against the NSRF and IFRS Sustainability Disclosure Standards;
  • Review and enhancement of GHG emissions data governance and internal controls;
  • Sustainability reporting framework alignment with Bursa Malaysia’s NSRF requirements;
  • ESG risk assessments and integration into enterprise risk management;
  • Management assurance reviews over sustainability reporting processes and controls; and
  • Capacity building, Board awareness sessions, and ESG reporting workshops.