IFRS S2 terminology reference

An emissions unit issued by a carbon crediting programme, representing a reduction or removal of greenhouse gases, and tracked and cancelled through an electronic registry.

IFRS S2 paragraph 36(e) requires you to disclose your planned use of carbon credits to meet a net emissions target, including the scheme that will verify or certify them. Buying credits does not reduce your gross emissions figure, which is disclosed separately.

IFRS S2 Appendix A

Your capacity to adjust to climate-related change, development and uncertainty, covering both strategic and operational resilience.

This is the subject of the scenario analysis requirement in IFRS S2 paragraph 22. It is a capacity assessment, not a score, and the Standard asks you to explain how you reached it.

IFRS S2 Appendix A

Risks from the physical effects of climate change, split into acute risks that are event-driven (storms, floods, drought, heatwaves) and chronic risks from longer-term shifts in climate patterns (sea level rise, water availability, temperature).

The acute and chronic split matters because the two behave differently in scenario analysis: acute risks show up as tail events, chronic risks as trends.

IFRS S2 Appendix A

Risks arising from the move to a lower-carbon economy, covering policy, legal, technological, market and reputational risk.

Transition risk is often mis-scoped as regulation only. Market and technology shifts, such as changing customer demand, sit inside the definition.

IFRS S2 Appendix A

The umbrella term. Risks are the potential negative effects of climate change on the entity; opportunities are the potential positive effects, including those created by mitigation and adaptation efforts.

IFRS S2 is written around the pair. Disclosing risks but not opportunities is a common gap.

IFRS S2 Appendix A

The part of your overall strategy setting out targets, actions and resources for your transition to a lower-carbon economy.

IFRS S2 does not require you to have a transition plan. It requires you to disclose one if you have it, which is a different obligation.

IFRS S2 Appendix A

The common unit for expressing the global warming potential of each greenhouse gas relative to one unit of carbon dioxide, so different gases can be added together.

Emissions are disclosed in tonnes of CO2 equivalent. The conversion depends on which global warming potential values you use, which is why the source of those values is disclosed.

IFRS S2 Appendix A

The share of an investee or counterparty’s gross greenhouse gas emissions attributed to the loans and investments you have made to them.

These sit inside Scope 3 Category 15. They apply to asset management, commercial banking and insurance activities, and carry additional disclosure requirements in IFRS S2 paragraphs 29(a)(vi)(2) and B58 to B63.

IFRS S2 Appendix A

A factor describing the atmospheric impact of one unit of a given greenhouse gas relative to one unit of CO2.

Values are periodically revised by the IPCC, so two entities using different assessment report vintages will produce different CO2e totals from identical activity data.

IFRS S2 Appendix A

The seven gases listed in the Kyoto Protocol: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, nitrogen trifluoride, perfluorocarbons and sulphur hexafluoride.

Seven, not six. Nitrogen trifluoride was added to the original Kyoto basket and is included.

IFRS S2 Appendix A

Emissions that result from your activities but occur at sources owned or controlled by someone else.

This is the concept that separates Scope 1 from Scopes 2 and 3.

IFRS S2 Appendix A

A price you apply internally to assess the financial implications of changes in investment, production and consumption, and of future abatement costs. Commonly either a shadow price (notional, not charged) or an internal tax or fee (actually charged to a business unit).

IFRS S2 paragraph 29(f) requires disclosure only if you actually apply one in decision-making, along with the price and how it is used.

IFRS S2 Appendix A

An agreement between states under the UN Framework Convention on Climate Change that sets norms and targets for reducing greenhouse gases.

The phrase is deliberately not tied to a named agreement, so it moves as international agreements are superseded. IFRS S2 paragraph 22(b)(i) asks whether your scenario analysis used a scenario aligned with it.

IFRS S2 Appendix A

Direct emissions from sources you own or control.

Company vehicles, on-site combustion and fugitive emissions from your own equipment.

IFRS S2 Appendix A

Indirect emissions from the electricity, steam, heating or cooling you purchase or acquire and consume.

Physically these occur at the generating facility. IFRS S2 paragraph 29(a)(v) requires location-based Scope 2 emissions, plus information about any contractual instruments.

IFRS S2 Appendix A

All other indirect emissions in your value chain, upstream and downstream, that are not Scope 2.

The largest and hardest category for most entities, and the one carrying its own transition relief in the first annual reporting period.

IFRS S2 Appendix A

The fifteen categories the GHG Protocol Scope 3 Standard divides value chain emissions into, from purchased goods and services through to investments.

IFRS S2 paragraph 29(a)(iv) requires disaggregation by these categories. Category 15 is investments, which is where financed emissions sit.

IFRS S2 Appendix A

Your system for converting inputs, through your activities, into outputs and outcomes that fulfil your strategic purposes and generate cash flows over the short, medium and long term.

IFRS S2 paragraph 13(a) asks where in the business model and value chain your climate risks and opportunities are concentrated, so the business model description is load-bearing, not scene setting.

IFRS S1 Appendix A

A specific sustainability-related risk or opportunity arising from the activities of entities in a particular industry, as set out in the industry-based guidance.

This is the hook connecting IFRS S1 and S2 to the SASB-derived industry guidance.

IFRS S1 Appendix A

Reports providing financial information about a reporting entity that is useful to primary users deciding whether to provide resources to it, covering buying, selling or holding instruments, providing credit, and exercising voting or influence rights.

These include but are not limited to the financial statements and the sustainability-related financial disclosures. This is the reporting boundary the whole framework hangs from.

IFRS S1 Appendix A

A requirement is impracticable when you cannot apply it after making every reasonable effort.

A high bar, and deliberately so. It is not the same as difficult, expensive or inconvenient, and it is the trigger for several reliefs.

IFRS S1 Appendix A

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions primary users make on the basis of the reports.

Note "obscuring". Burying material information in volume is a materiality failure, not just a presentation one.

IFRS S1 Appendix A

Existing and potential investors, lenders and other creditors.

This is the single most consequential definition in the framework. It is what makes ISSB reporting financially focused rather than addressed to all stakeholders.

IFRS S1 Appendix A

An entity that is required, or chooses, to prepare general purpose financial statements.

IFRS S1 requires the sustainability disclosures to cover the same reporting entity as the related financial statements.

IFRS S1 Appendix A

A process for identifying and assessing a potential range of outcomes of future events under conditions of uncertainty.

It is not forecasting and not a prediction. IFRS S2 paragraph 22 requires an approach commensurate with your circumstances, so a qualitative narrative approach can be valid.

IFRS S1 Appendix A

A form of general purpose financial report giving information about the sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, access to finance or cost of capital over the short, medium or long term.

The "could reasonably be expected to affect" test is the scoping test for what belongs in the report at all.

IFRS S1 Appendix A

The full range of interactions, resources and relationships related to your business model and the external environment in which you operate.

Broader than a supply chain. It runs both upstream and downstream and includes relationships, not just purchases.

IFRS S1 Appendix A

The same population as primary users. IFRS S1 states explicitly that the two terms describe the same group.

Worth knowing, because the two phrasings appear in different paragraphs and are sometimes read as a broader and a narrower audience. They are not.

IFRS S1 Appendix A

The effects you expect climate risks and opportunities to have on your financial position, financial performance and cash flows over the short, medium and long term.

IFRS S2 paragraph 17 permits a single amount or a range, and paragraphs 18 to 21 provide relief where you lack the skills, capabilities or resources to give a quantified figure.

IFRS S2 paragraphs 15 to 21

The effects on your reported financial position and performance for the period, and the assets and liabilities carrying a material risk of adjustment in the next year.

Distinguish carefully from anticipated effects. The current-effects requirement reaches into the financial statements themselves.

IFRS S2 paragraphs 15 to 16

The seven categories every entity reports against regardless of sector: greenhouse gas emissions, transition risk exposure, physical risk exposure, climate-related opportunities, capital deployment, internal carbon prices, and remuneration.

These are the metrics nobody escapes. Industry-based metrics sit on top of them.

IFRS S2 paragraph 29

Metrics associated with the disclosure topics for your particular industry, drawn from the industry-based guidance that accompanies IFRS S2.

IFRS S2 requires you to refer to and consider the applicability of this guidance. That is a weaker obligation than applying it, and it is frequently overstated in both directions.

IFRS S2 paragraphs 32 and B62

The amount of capital expenditure, financing or investment deployed toward climate-related risks and opportunities.

One of the seven cross-industry categories, and often the one that first connects the sustainability report to the capital allocation process.

IFRS S2 paragraph 29(d)

Your absolute emissions before deducting any carbon credits, offsets or other adjustments.

IFRS S2 requires gross emissions. A net figure may be given in addition, but it does not replace the gross disclosure.

IFRS S2 paragraph 29(a)

The method, inputs and assumptions you used to measure emissions, and your reasons for choosing them.

This is where an audit trail becomes visible. The number alone does not satisfy the requirement.

IFRS S2 paragraph 29(a)(ii) to (iii)

The basis on which you draw your emissions boundary: equity share, financial control or operational control.

IFRS S2 requires you to disclose which one you use. Changing it between periods changes your reported emissions without anything physical having changed.

IFRS S2 paragraph 29(a)(iii)(1)

Information available to you at the reporting date without undue cost or effort.

This is the standing proportionality test running through IFRS S1 and S2. It is why a smaller entity is not expected to produce the same evidence base as a large one.

IFRS S1 paragraphs B6 and following

The threshold beyond which you are not required to obtain information, assessed against your own circumstances rather than an external benchmark.

Because it is entity-specific, the same effort can be undue for one preparer and not for another. Document how you reached the judgement.

IFRS S1 and IFRS S2

The requirement that your sustainability disclosures connect coherently to each other and to the financial statements, including using consistent data and assumptions where possible.

This is the requirement most often failed silently: a climate narrative that assumes one scenario and financial statements that assume another.

IFRS S1 paragraphs 21 to 24

Prior-period figures for every amount disclosed, updated if your estimates change.

Not required in the first annual reporting period, under the IFRS S1 paragraph E5 relief.

IFRS S1 paragraphs 70 and B48

The time-limited exemptions available when you first apply the Standards, covering comparatives, timing of reporting, Scope 3, GHG measurement method and climate-first reporting.

Several extend into the second year through the comparative-information provisions. Covered in detail in our transition reliefs guide.

IFRS S1 Appendix E and IFRS S2 Appendix C

The relief permitting you to disclose only climate-related information in your first annual reporting period, deferring the wider sustainability scope.

Adopted as the default starting point by several jurisdictions rather than as an entity-level choice.

IFRS S1 paragraph E5

The principle that the depth of your approach should reflect your skills, capabilities and resources, most visibly in the scenario analysis requirement.

Proportionate does not mean optional. It changes the depth expected, not whether you do it.

IFRS S1 and IFRS S2

The industry-specific standards, now maintained by the ISSB, that supply the disclosure topics and industry-based metrics referred to by IFRS S1 and IFRS S2.

The ISSB assumed responsibility for them in 2022. They are referenced by the Standards rather than incorporated wholesale.

referenced by IFRS S1 and IFRS S2

The 2004 Corporate Accounting and Reporting Standard, which IFRS S2 requires you to measure emissions under unless a jurisdictional authority or an exchange you are listed on requires a different method.

The exception is narrow: a regulator or exchange requirement, not a preference.

referenced by IFRS S2 paragraph 29(a)(ii)

The 2011 Corporate Value Chain (Scope 3) Accounting and Reporting Standard, which supplies the fifteen Scope 3 categories.

Referenced by IFRS S2 for the category structure and for financed emissions.

referenced by IFRS S2 Appendix A

Two methods of calculating purchased-electricity emissions: location-based uses average grid emission factors, market-based reflects contractual instruments such as renewable energy certificates.

IFRS S2 paragraph 29(a)(v) requires the location-based figure, plus information about contractual instruments necessary to understand your Scope 2 emissions.

GHG Protocol Scope 2 Guidance

A coefficient converting activity data, such as litres of fuel or kilowatt hours, into a quantity of greenhouse gas emissions.

The single largest source of restatement risk in practice, because published factors are revised and vintages get mixed.

GHG Protocol

An engagement where the practitioner performs fewer procedures than a reasonable assurance engagement and expresses a conclusion in the negative form, that nothing has come to their attention suggesting a material misstatement.

The starting point in most jurisdictions that mandate assurance at all. See our assurance standards reference.

assurance standards

A higher level engagement, expressed as a positive opinion, comparable to a financial statement audit.

Some jurisdictions phase up to this over time. Few require it from the first reporting period.

assurance standards

The European approach requiring reporting on both the effects of sustainability matters on the entity and the entity’s own impacts on people and the environment.

IFRS S1 and S2 do not use this concept. They apply a single, investor-focused materiality. This is the deepest structural difference between the two regimes.

ESRS and the CSRD

The materiality lens used by IFRS S1 and S2: what could reasonably be expected to influence primary users’ resource-allocation decisions.

Sometimes called single materiality when contrasted with the European approach.

contrast with ESRS

The ISSB’s description of its Standards as a common floor that jurisdictions can build on, rather than a ceiling.

It explains why jurisdictional adoptions add requirements more often than they remove them.

ISSB framing

The degree to which disclosures prepared under one framework can be used to satisfy another, addressed for ISSB and ESRS in jointly published guidance.

Mapped requirement by requirement in our crosswalk.

ISSB and EFRAG guidance