The International Sustainability Standards Board (ISSB) has unveiled proposed amendments to its climate disclosure standard (IFRS S2), offering financial institutions relief in reporting certain Scope 3 greenhouse gas (GHG) emissions. These changes aim to ease the reporting burden while maintaining the decision-usefulness of disclosures for investors, helping financial institutions better manage the complexities of climate reporting.
“As a market-focused standard-setter, we have taken steps to respond in a timely manner by proposing targeted amendments helping preparers where possible, without causing too much disruption,” said Sue Lloyd, ISSB Vice-Chair.
The key amendments would allow financial institutions to exclude emissions linked to derivatives, facilitated transactions, and insurance activities from Scope 3 Category 15 disclosures. While exclusions are permitted, institutions would be required to disclose the volume of these activities to maintain transparency. This move addresses significant challenges these institutions face while ensuring they remain aligned with global sustainability frameworks.
Additional proposals in the amendments include:
- Exempting the use of the Global Industry Classification Standard (GICS) in some cases when reporting financed emissions data.
- Allowing jurisdiction-required Global Warming Potential (GWP) values not fully aligned with the latest IPCCassessments.
- Permitting alternative GHG measurement methodologies if required by local authorities, rather than solely following the Greenhouse Gas Protocol.
These reliefs are aimed at reducing compliance costs for financial institutions, particularly those dealing with complex financial products like derivatives and insurance, while maintaining alignment with global sustainability goals.
Maura Hodge, KPMG US Sustainability Leader, highlighted the significance of these changes, saying, “The ISSB’s proposed amendments represent a pragmatic evolution of climate disclosure standards, acknowledging the unique challenges financial institutions face while preserving transparency.”
The ISSB has made it clear that the proposed reliefs are optional, offering flexibility for preparers while ensuring that climate disclosures continue to provide meaningful information for investors. The proposed amendments are currently open for public comment until June 27, 2025, with final amendments expected by the end of 2025, contingent on the feedback analysis.
These amendments reflect the ISSB’s commitment to maintaining a careful balance between the ambition of climate disclosures and the practical realities of their implementation, helping to ensure financial institutions can effectively contribute to global sustainability efforts.
