In brief: IFRS S1 establishes the general requirements for disclosing sustainability-related risks and opportunities that could affect an entity’s prospects. IFRS S2 applies the same architecture specifically to climate. In practice, organisations use them together and document any transition reliefs or later amendments they adopt.
The ISSB issued IFRS S1 and IFRS S2 in June 2023. Their primary audience is users of general-purpose financial reports, so disclosures focus on information that could influence assessments of cash flows, access to finance or cost of capital. The standards are designed to be proportionate to an entity’s circumstances. Targeted IFRS S2 greenhouse-gas disclosure amendments issued in December 2025 become effective for periods beginning on or after 1 January 2027, with early application permitted.
S1 provides the general foundation
S1 covers reporting boundaries, materiality, connected information, comparative information and the four core content areas. It does not prescribe one universal list of ESG indicators. The organisation identifies risks and opportunities relevant to its business model, industry, value chain and prospects, then explains the judgements behind that scope.
S2 focuses on climate-related information
S2 addresses climate governance, strategy, risk processes, performance, greenhouse-gas emissions, transition plans, scenario analysis and industry-based information. Climate data should connect to operational and financial consequences. Organisations should distinguish current facts, forward-looking assumptions and areas where capability is still developing.
Materiality is investor-focused
Information is material when omitting, misstating or obscuring it could reasonably be expected to influence the decisions of primary users. A percentage threshold alone is insufficient. Document why a risk or opportunity matters, the relevant time horizon and how the judgement connects to strategy, finance and risk management.
Hong Kong implementation needs a requirements map
Listed issuers should map HKEX requirements against the ISSB architecture and applicable transition arrangements. Non-listed organisations may use the standards to prepare for lender, customer or supply-chain requests, but should not imply a statutory obligation or claim full compliance before every required disclosure and basis of preparation is supported.
A practical implementation sequence
Build a disclosure gap map rather than drafting report chapters first. Classify current information as reusable, in need of stronger control, unavailable or subject to a transition relief. Assign each gap to a business owner and record the standard version used.
- Map S1 and S2 against HKEX, lender and customer requirements.
- Identify sustainability risks and opportunities across the value chain.
- Assign owners for governance, strategy, risk and metrics disclosures.
- Prioritise greenhouse-gas and climate-risk data controls.
- Document materiality judgements, estimates, reliefs and amendments adopted.
For every step, retain the owner, source, reporting period, method, version, reviewer and known limitations. Estimates can be useful during transition, but they should never be presented as measured data.
Decision risks to control
- Treating S1 as another climate-only standard.
- Copying another company’s risk list without testing business relevance.
- Claiming full compliance while omitting requirements or using undisclosed reliefs.
Retain the requirements map, materiality papers, calculation methods, control records, transition-relief decisions and management approvals. A version register is important because the original standards, later amendments and local adoption arrangements can have different effective dates.
Frequently asked questions
Can IFRS S1 and S2 be applied separately?
S2 is designed to be applied with S1, which supplies the shared concepts, reporting boundaries, materiality and general disclosure requirements.
Must every Hong Kong company use ISSB Standards?
No universal answer applies. Duties depend on listing, regulatory, contractual and reporting arrangements. Other organisations may use the standards voluntarily.
Do the standards require every ESG metric?
No. The focus is material sustainability-related risks and opportunities that could reasonably be expected to affect the organisation’s prospects.
What changed in the 2025 IFRS S2 amendments?
They provide targeted reliefs and clarifications for greenhouse-gas disclosures. They are effective from 2027 reporting periods, with early application allowed.
Authoritative sources
- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
- IFRS S2 Climate-related Disclosures
- HKEX Appendix C2 Environmental, Social and Governance Reporting Code
- ISSB issues targeted amendments to IFRS S2 to support implementation
This article is for general information and education only. It is not legal, investment, financial, assurance, certification, compliance or other professional advice.