Section 9 – Portfolio management and disclosure

Module 23 – IFRS S2-aligned disclosures

Climate disclosure expectations are evolving, with several competing standards in use, including the EU CSRD requirements, TCFD recommendations, IFRS S2 specifications and GRI standards. This toolkit focuses on IFRS S2, which is already being used as a baseline template for mandatory national disclosure requirements in many countries.

While some emerging markets may not yet require such disclosures, FIs should consider making such disclosures voluntarily. Doing so offers several benefits:

• Benefits of Voluntary Disclosure

  Regulatory readiness

  Voluntary disclosure helps prepare for future legal requirements by embedding climate risk management processes into the organisation early, building internal capacity and reducing the learning curve before reporting becomes mandatory.

  Investor and lender confidence

  Impact investors, lenders and DFIs and MDBs increasingly expect transparent and comparable climate-related disclosures as a precondition for concessional finance.

  Market differentiation

  Proactive disclosure signals credible climate risk management and positions the institution as forward-looking and future-ready in a competitive marketplace.

  Enhanced risk management

  Reporting helps identify key vulnerabilities and transition opportunities, enabling better business decisions and long-term value creation.

The following stakeholders are the target audience for climate-related disclosures:

• Target Stakeholders for climate-related disclosures

  Investors and asset managers

  Use disclosures to assess climate risk exposure, strategy alignment and future resilience, which informs their capital allocation and stewardship strategy.

  Banks and credit providers

  Use disclosures to evaluate the borrower’s ability to withstand climate shocks and transition risks, directly affecting credit risk assessments.

  Regulators and supervisors

  Use disclosures to assess systemic financial risks and market stability, especially in emerging and climate-vulnerable economies.

  Internal stakeholders

  Such as board and senior management, use disclosures to improve strategy, inform risk appetite and set operational priorities.

What stakeholders look for in climate-related disclosures:

• Climate-related disclosure – key information demanded by stakeholders

  Decision-useful information

  Clear, relevant information that helps them understand both risks and opportunities, as well how the institution is preparing to navigate the business environment.

  Transparency about limitations

  Openness about the data gaps, methodology constraints and other areas for improvement demonstrates a robust risk culture, realistic self-assessment and proactive management, which all builds stakeholder trust.

First-time IFRS S2 preparers are not expected to provide complete or definitive answers to all questions. Where gaps exist, IFRS S2 guidance encourages disclosing current limitations and proposed improvement plans.

The IFRS S2 disclosure standard

IFRS S2 effectively represents a global baseline for climate-related financial disclosures that transforms climate disclosures from voluntary sustainability reporting into mandatory decision-useful financial information. IFRS S2 applies a financial materiality lens, requiring institutions to only disclose climate factors reasonably expected to affect enterprise value, cash generation, or capital costs. Its primary audience is clearly defined as investors, lenders, and creditors that rely on the information for allocation decisions.

The standard requires reporting across four interconnected pillars that mirror traditional financial risk management:

• Governance
  Describe how the board and management oversee and manage climate-related issues, including committee structures, roles and responsibilities, and accountability mechanisms.
• Strategy
  Explain the material climate risks and opportunities affecting cash flows, access to finance, or cost of capital over short, medium, and long-term horizons. Include scenario analysis that demonstrates the institution’s resilience under different climate futures.
• Risk Management
  Show how climate considerations are integrated into enterprise risk frameworks, including the identification, assessment, prioritisation, and monitoring processes for both physical risks (such as extreme weather and sea-level rise), and transition risks (such as policy changes, technology shifts, and market evolution).
• Metrics & Targets
  Report on key quantitative performance indicators, including mandatory Scope 1, 2, and 3 GHG emissions, industry-specific metrics aligned with Sustainability Accounting Standards Board (SASB) standards, and progress against stated climate targets.

Tool 8

This tool offers a conceptual overview of the disclosure requirements under the four IFRS S2 pillars: Governance, Strategy, Risk Management and Metrics & Targets. It can be used as a checklist to ensure alignment with the disclosure standard, and as a practical communication tool for engaging with internal and external stakeholders on key climate risk issues.

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