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IFRS S2: Understand why climate becomes a financial, strategic and governance issue from 2026 

Published on February 05, 2026 

In recent years, the disclosure of sustainability information has evolved rapidly. What was previously treated as a reputational or voluntary issue is now part of the core of corporate and financial decisions. This movement is consolidated with the publication of the IFRS S1 and IFRS S2 standards, developed by the International Sustainability Standards Board (ISSB), linked to the IFRS Foundation. 

These standards establish a new global basis for sustainability reporting, with a direct focus on the risks and opportunities that affect companies’ financial performance. 

What are IFRS S1 and IFRS S2? 

 IFRS S1 – General Requirements for Disclosure of Sustainability-Related Financial Information defines the general principles for sustainability reporting. It requires companies to disclose relevant information on sustainability structured on four pillars: 

  • Governance 
  • Strategy 
  • Risk management 
  • Metrics and goals 

IFRS S1 serves as the basis for reporting, applicable to all sustainability topics that may impact the company’s economic value. 

IFRS S2 – Disclosure of Climate-Related Information, which is the focus of this article, deepens the reporting structure specifically for the climate topic. The standard sets out how organizations should disclose risks and opportunities associated with climate change, including greenhouse gas emissions, physical and transition risks, transition plans, and climate targets. 

In practice, IFRS S2 translates the climate theme into strategic, financial, and risk variables, making it clear that climate change is not just an environmental issue, but a material factor for the performance and decision-making of organizations. 

In this article, the focus will be on two central points of IFRS S2: the role of the inventory of Greenhouse Gas (GHG) emissions as the technical basis for climate reporting and the transparency and integrity criteria required for the use of carbon credits in meeting climate goals. 

From 2026, what changes in climate reporting? 

Starting in 2026, companies will be evaluated not only by the existence of climate goals, but by the quality, consistency, and completeness of the information disclosed on how the climate impacts their strategy, risks, and financial performance. 

IFRS S2 significantly raises the standard of climate reporting by requiring, in an integrated manner: 

  • clear governance on the climate issue, with defined responsibilities and decision-making processes; 
  • a structured transition plan, with strategic and financial implications; 
  • physical climate risk management and transition integrated with Enterprise Risk Management (ERM); 
  • climate metrics and targets, covering scopes 1, 2 and 3; 
  • transparency about the planned use of carbon credits and their role in meeting the targets. 

In this new context, climate and carbon are no longer treated as isolated sustainability topics and are now analyzed as strategic, financial, and risk factors, subject to greater scrutiny by investors, regulators, and other users of information. 

Organizations that start this structuring in advance tend to gain consistency, predictability, and competitive advantage in the new reporting cycle. 

Climate at the heart of strategy, governance and finance 

With the adoption of IFRS S2, the climate agenda definitively enters the field of financial execution. Companies are now evaluated not only by inventories or public commitments, but by how the climate issue is governed, supervised, and incorporated into corporate decisions. 

The standard requires organizations to be able to objectively explain: 

  • who is responsible for the climate issue at the board and senior management level; 
  • how climate-related risks and opportunities are integrated into strategy and risk management; 
  • how climate-related decisions influence investments, capital allocation, and business priorities; 
  • how these impacts are monitored, reviewed, and adjusted over time. 

In practice, climate is no longer an operational or reputational agenda and starts to occupy the space of financial and corporate governance issues, with direct effects on planning, risk and economic value. 

Climate risks and integration into Enterprise Risk Management 

One of the most relevant advances of IFRS S2 is the explicit requirement to integrate climate risks into Enterprise Risk Management (ERM). 

The standard requires companies to demonstrate how physical and transition climate risks are: 

  • identified, evaluated and prioritized; 
  • incorporated into the risk management system; 
  • analyzed over different time horizons (short, medium and long term); 
  • connected to strategy, investments and business continuity. 

Physical risks include extreme weather events and changing weather patterns, while transition risks are associated with regulation, market, technology, and reputation. 

As a result, the climate is subject to monitoring, governance and accountability. Companies that do not integrate these risks into ERM tend to be more vulnerable to physical, regulatory, financial, and reputational impacts. 

Emissions inventory and decarbonization plan as the basis of climate goals 

In IFRS S2, climate targets are only considered robust when supported by consistent data and a clear decarbonization plan. Therefore, the emissions inventory now occupies a central role in corporate climate reporting. 

The standard requires companies to demonstrate, in a structured way: 

  • an emissions inventory covering scopes 1, 2 and 3 (scope 3 being mandatory where relevant – and, on average, it represents about 90% of companies’ total emissions); 
  • clearly defined methodologies, assumptions and organizational boundaries; 
  • consistency and comparability of data over time; 
  • the use of inventory as an input for the climate strategy; 
  • the existence of a decarbonization plan, with a trajectory of reduction and prioritization of levers. 

In practice, the inventory becomes the technical basis for strategic decisions, planning, and monitoring of the climate transition. 

The role of carbon credits in IFRS S2 

After establishing the inventory and the decarbonization plan as the basis of the targets, IFRS S2 moves on to a sensitive point that is increasingly scrutinized by the market: the use of carbon credits. 

The standard allows the use of credits, as long as they are clearly inserted in the company’s climate strategy and do not replace real efforts to reduce emissions. At the same time, it significantly raises the bar for transparency and justification for this use. 

Companies must disclose, among other points: 

  • whether they use or intend to use carbon credits; 
  • to what extent these credits contribute to the achievement of the targets; 
  • how the use of credits relates to real emission reductions; 
  • what quality, integrity and traceability criteria are adopted; 
  • how this strategy connects to the transition plan and the decarbonization trajectory. 

Carbon credits are no longer a residual adjustment and are now treated as a reportable strategic decision, with a direct impact on the credibility of climate goals. 

Transparency and integrity in the use of carbon credits 

IFRS S2 organizes the disclosure of carbon credits into five major dimensions, which will guide the analysis of investors and other users of the information: 

  • dependence on the target; 
  • verification and certification; 
  • types of credit; 
  • nature of the compensation; 
  • credibility and integrity. 

A central point is the dependence on the target: the standard requires companies to make clear the extent to which their climate targets depend on the use of credits, distinguishing real emission reductions from offsetting instruments. 

Targets that are excessively dependent on credits, without a consistent reduction trajectory, tend to be subject to greater scrutiny in the new reporting cycle. The focus of IFRS S2 is not to restrict the use of credits, but to ensure clarity, integrity and consistency about the role they play in the transition to a low-carbon economy. 

Who will be impacted? 

In Brazil, the adoption of IFRS S1 and S2 standards was formalized by CVM Resolution No. 193/2023, making the disclosure of this information mandatory for publicly-held companies, starting in the fiscal years starting on January 1, 2026, with publication in 2027. 

Despite this, private companies also tend to be impacted indirectly, especially those that are part of the value chain of listed companies or that seek access to financing, investments and large corporate contracts. 

How Future Climate can support your company 

At Future Climate, we support organizations in all stages of preparation for IFRS S2 — from structuring robust emissions inventories, through the preparation of decarbonization plans, to defining responsible strategies for the use of high-integrity carbon credits. 

Our work connects climate data to strategy, risk management, and financial decisions, helping companies turn regulatory requirements into competitive advantage and long-term value creation. 

👉 Talk to Future Climate and prepare your company for the new climate reporting cycle. 

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