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IFRS S2

Climate-related Disclosures

IFRS S2 requires an entity to disclose information about its climate-related risks and opportunities that is useful to primary users of general purpose financial reports, building on and applying IFRS S1's general framework specifically to climate matters, and fully integrating the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). [S1]

Effective 2024-01-01Related: IFRS S1 · IAS 36 · IAS 16 · IAS 37

Overview

IFRS S2 is the ISSB's first topic-specific sustainability standard, requiring disclosure of climate-related risks (both physical risks, such as extreme weather events, and transition risks, such as policy, legal, technology and market shifts arising from the move to a lower-carbon economy) and climate-related opportunities that could reasonably be expected to affect an entity's cash flows, access to finance, or cost of capital over the short, medium and long term. [S1] It requires disclosure organised around the same four TCFD-aligned content areas as IFRS S1 (governance, strategy, risk management, and metrics and targets), but with climate-specific requirements layered on top, including scenario analysis of climate resilience, greenhouse gas emissions disclosure (Scope 1, 2 and, subject to specific relief provisions, Scope 3), and industry-based metrics derived from SASB Standards. [S2]

Why it matters

For Nigerian entities across energy, agriculture, real estate, financial services and manufacturing, physical climate risk (flooding, extreme heat, erratic rainfall affecting agricultural supply chains) and transition risk (shifting global demand away from fossil fuels, evolving carbon pricing and border adjustment mechanisms affecting export competitiveness) are not abstract, future concerns but live factors already affecting operations, asset values and financing costs. IFRS S2 forces this reality into a structured, comparable, decision-useful disclosure format, including quantified greenhouse gas emissions and forward-looking scenario analysis, which is a materially higher bar than most existing Nigerian corporate climate commentary.

Scope

Applies to an entity applying IFRS S1, requiring disclosure of climate-related risks (physical and transition) and climate-related opportunities to which the entity is exposed. IFRS S2 builds on IFRS S1's general requirements and cannot be applied in isolation from IFRS S1's governance, strategy, risk management and connected-information framework; an entity choosing early application of the ISSB Standards ahead of a jurisdiction's mandatory adoption date must apply both IFRS S1 and IFRS S2 together, not IFRS S2 alone.

Key definitions

term
Climate-related risks
definition
Physical risks (arising from climate change, such as acute extreme weather events or chronic longer-term shifts in climate patterns) and transition risks (arising from the transition to a lower-carbon economy, including policy, legal, technology, market and reputational risks) that could reasonably be expected to affect an entity's prospects.
term
Climate-related opportunities
definition
The potential positive effects arising from climate change and the transition to a lower-carbon economy for an entity, such as resource efficiency, energy source changes, new products and services, and access to new markets.
term
Scenario analysis
definition
A process for identifying and assessing a potential range of plausible future states of the world (climate-related scenarios), used to understand an entity's climate resilience under different possible outcomes.
term
Scope 1 greenhouse gas emissions
definition
Direct greenhouse gas emissions from operations owned or controlled by the entity.
term
Scope 2 greenhouse gas emissions
definition
Indirect greenhouse gas emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed by the entity.
term
Scope 3 greenhouse gas emissions
definition
Indirect greenhouse gas emissions, other than Scope 2, that occur in an entity's value chain, including both upstream and downstream emissions.

Recognition

As with IFRS S1, IFRS S2 does not use a balance-sheet 'recognition' concept; it requires an entity to identify climate-related risks and opportunities reasonably expected to affect its prospects, using a materiality assessment consistent with IFRS S1's general framework, and to determine the extent to which its business model and value chain are concentrated in climate-vulnerable assets, activities, or geographic locations that warrant disclosure. Entities are required to disclose gross Scope 1 and Scope 2 greenhouse gas emissions (measured in accordance with the Greenhouse Gas Protocol, subject to any jurisdiction-permitted alternative), and Scope 3 emissions where material, subject to specified relief (including transitional relief for Scope 3 measurement difficulty and, following the ISSB's December 2025 amendments, further support for entities applying specific greenhouse gas disclosure requirements during the implementation phase).

Initial measurement

Climate-related metrics, including greenhouse gas emissions, are measured using the methodologies IFRS S2 specifies (the Greenhouse Gas Protocol as the default basis for emissions measurement, with limited jurisdiction-specific alternatives), and financial effects of climate-related risks and opportunities are quantified using all reasonable and supportable information available without undue cost or effort, consistent with IFRS S1's general measurement principles, disclosing the approach, inputs, assumptions and sources of uncertainty involved.

Subsequent measurement

Climate-related disclosures, including greenhouse gas emissions metrics and scenario analysis conclusions, are updated each reporting period to reflect the entity's current assessment, actual emissions data, and evolving climate scenarios; entities are also required to disclose any restatements of previously reported greenhouse gas emissions figures and the reasons for such restatements, given the evolving nature of emissions measurement methodologies and data quality in many markets, including Nigeria.

Presentation

Climate-related financial disclosures are presented as part of an entity's general purpose sustainability-related financial disclosures under IFRS S1, reported together with (and connected to) the entity's related financial statements; greenhouse gas emissions are disclosed separately for Scope 1, Scope 2 (using both location-based and, where different, market-based methods), and Scope 3 (disaggregated by category where material), rather than presented as a single combined figure.

Disclosure checklist

  • Governance: the governance body(s) or individuals responsible for oversight of climate-related risks and opportunities, and management's role in assessing and managing them.
  • Strategy: current and anticipated effects of climate-related risks and opportunities on the entity's business model, value chain, strategy and decision-making, and financial position, performance and cash flows, including climate resilience assessed through scenario analysis.
  • Risk management: processes to identify, assess, prioritise and monitor climate-related risks and opportunities, integrated into the entity's overall risk management process.
  • Metrics and targets: gross Scope 1, Scope 2 and (where material) Scope 3 greenhouse gas emissions; climate-related transition risk, physical risk, and opportunity metrics; capital deployment towards climate-related risks and opportunities; internal carbon prices, where used; and remuneration linked to climate-related considerations, where applicable.
  • Targets set to mitigate or adapt to climate-related risks or maximise climate-related opportunities, including any greenhouse gas emissions targets, and progress against them.
  • Significant judgements, assumptions and sources of estimation uncertainty in measuring greenhouse gas emissions and other climate-related metrics.

Practical treatment

The practical discipline is building genuine emissions measurement and scenario analysis capability, not simply narrative climate commentary: Scope 1 and Scope 2 emissions measurement, using the Greenhouse Gas Protocol, requires operational data most Nigerian entities have not historically tracked in a structured way, and Scope 3 emissions (often the largest component for many sectors) require value-chain data frequently unavailable from Nigerian suppliers not yet subject to their own reporting obligations, making the transitional Scope 3 relief genuinely important in practice. Scenario analysis, assessing climate resilience under different plausible future states, is a new discipline for most entities and should be proportionate to the entity's size, complexity and climate exposure rather than defaulting to generic, imported scenario assumptions disconnected from Nigerian conditions. See nigeria_notes for FRCN's specific roadmap and the Nigerian physical and transition risk context.

Common mistakes

  • Disclosing only qualitative climate narrative without the required quantitative greenhouse gas emissions metrics (Scope 1, 2, and material Scope 3).
  • Combining location-based and market-based Scope 2 emissions into a single figure rather than disclosing both methods where they differ.
  • Applying generic, imported climate scenarios without adapting them to reflect Nigeria-specific physical risk factors (flooding, extreme heat, erratic rainfall) and transition risk factors (energy mix, export market exposure).
  • Treating Scope 3 emissions measurement as entirely optional rather than assessing materiality and applying the specific transitional relief where genuine measurement difficulty exists.
  • Failing to disclose restatements of previously reported emissions figures and the reasons for them, as emissions measurement methodology and data quality improve over time.
  • Applying IFRS S2 without also applying IFRS S1's underlying general governance, strategy, risk management and connected-information framework.

CFO checklist

  • Establish structured Scope 1 and Scope 2 greenhouse gas emissions data collection using the Greenhouse Gas Protocol methodology.
  • Assess Scope 3 emissions materiality and data availability, applying transitional relief where genuine measurement difficulty exists, while working towards improved value-chain data over time.
  • Develop climate scenario analysis proportionate to the entity's size, complexity and exposure, adapted to Nigeria-specific physical and transition risk factors.
  • Integrate climate-related risk identification into the entity's overall risk management process, not as a separate, siloed exercise.
  • Disclose climate-related targets (including any emissions targets) and track progress against them each period.
  • Monitor FRCN's Nigeria-specific IFRS Sustainability Disclosure Standards roadmap and Adoption Readiness Working Group requirements for the applicable compliance phase.

FAQs

q
Do we have to disclose Scope 3 greenhouse gas emissions even if we can't get reliable data from our suppliers?
a
IFRS S2 requires Scope 3 disclosure where material, but includes transitional relief acknowledging the genuine measurement difficulty many entities face, particularly where value-chain data from suppliers is not yet available; entities should assess materiality, use reasonable estimation techniques and available proxies, disclose their approach and its limitations, and work towards improved data over time rather than omitting Scope 3 disclosure entirely without justification.
q
Can we just describe our climate risks in words rather than quantifying greenhouse gas emissions?
a
No. IFRS S2 specifically requires quantitative disclosure of gross Scope 1 and Scope 2 greenhouse gas emissions (and material Scope 3 emissions), in addition to qualitative governance, strategy and risk management narrative; qualitative description alone does not satisfy the Standard's metrics and targets requirements.
q
Do we need to use a global climate scenario model, or can we build our own for Nigeria?
a
IFRS S2 does not mandate a specific scenario model; entities should use scenario analysis proportionate to their size, complexity and climate exposure, and are expected to adapt or supplement generic global scenarios with entity- and jurisdiction-specific considerations (such as Nigeria-specific flooding, extreme heat, or energy transition exposure) where these are more decision-useful to primary users than an unadapted global model alone.

Nigeria application notes

Regulatory overlay

IFRS S2 falls within the FRCN's overarching mandate under the FRCN Act 2011, and is the primary initial focus of Nigeria's phased IFRS Sustainability Disclosure Standards adoption roadmap, consistent with the ISSB's own first-year transition relief prioritising climate disclosure. [S3][S4][S5] Nigeria faces material, well-documented physical climate exposure (flooding affecting the Niger Delta and other regions, rising temperatures affecting agriculture) and transition exposure (dependence on oil and gas export revenue amid global energy transition trends), making IFRS S2 disclosure particularly consequential for Nigerian energy, agriculture, financial services and infrastructure entities.

Tax interaction (Nigeria)

IFRS S2 disclosure requirements do not directly affect Nigerian companies income tax computations, though certain climate-related costs (contributions to approved environmental remediation funds, referenced within the broader Nigeria Tax Act 2025 reforms) may attract specific tax deduction treatment; entities should assess the tax treatment of climate-related expenditures and provisions separately against current NRS practice rather than assuming IFRS S2's disclosure framework determines their tax deductibility. [S_TAX1][S_TAX2] Nigerian rates, thresholds, exemptions, incentives and filing rules referenced in this file (including CIT, VAT, sector-specific regulatory requirements, and the small-company threshold) should be independently verified against the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, FRCN/NERC/sector-regulator guidance, and current NRS practice at the reporting or filing date, since thresholds, rates and reliefs are subject to periodic revision and to sector- or entity-specific qualifying conditions. This file does not constitute legal or tax advice. [S_TAX1][S_TAX2]

FX considerations

Nigerian entities quantifying the financial effects of climate-related risks and opportunities in naira, where those effects relate to foreign-currency-denominated climate transition financing, imported low-carbon technology, or export market exposure to carbon border adjustment mechanisms, should apply a consistent, disclosed exchange rate translation basis (such as the CBN NFEM rate); naira volatility can materially affect the reported naira value of climate-related capital deployment and financing figures period to period, independent of the underlying climate risk itself. Nigerian interest rate conditions (reflected in CBN monetary policy decisions) are also relevant context for the discount rates and cost-of-capital assumptions used in climate scenario analysis and climate-related financial effect quantification. [S6]

SME practical note

IFRS S2 is currently most relevant to larger Nigerian public interest entities within FRCN's phased adoption roadmap, particularly those in energy, agriculture, financial services and heavy industry; Outliers recommends that SME clients in these sectors, even if not yet directly in scope, begin basic Scope 1 and Scope 2 emissions data tracking now, since building this capability from scratch under a compliance deadline is considerably harder than developing it incrementally in advance, and increasingly larger customers and lenders are requesting this data informally even ahead of formal regulatory requirements.

Common Nigerian pitfalls

  • Assuming FRCN's IFRS Sustainability Disclosure Standards roadmap timeline is fixed and unchanging, rather than checking the current amended version for the applicable phase and deadline.
  • Applying unadapted global climate scenarios without reflecting Nigeria-specific physical risk (flooding, heat) and transition risk (oil and gas export dependence) factors.
  • Treating existing informal climate or environmental commentary as sufficient without building genuine Scope 1/2 (and, where material, Scope 3) emissions measurement capability.
  • Overlooking naira/foreign-currency translation consistency when quantifying climate-related financial effects involving foreign-currency-denominated financing or costs.

FRC pronouncements

The FRCN's April 2024 Roadmap Report (amended in 2026) is a genuine, standard-specific pronouncement establishing a phased adoption timeline and an Adoption Readiness Working Group process for the IFRS Sustainability Disclosure Standards in Nigeria, including gap analysis, board-level resolution, and implementation planning stages ahead of each roadmap phase; affected Nigerian entities should confirm the current phase and applicable deadline directly against FRCN's published roadmap and any subsequent updates. [S4][S5]

Worked examples

Disclosing Scope 1 and Scope 2 greenhouse gas emissions

A Nigerian manufacturing company measures its greenhouse gas emissions for the first time under IFRS S2. Using the Greenhouse Gas Protocol methodology, it determines Scope 1 emissions (direct emissions from its own diesel generators and vehicle fleet) of 12,000 tonnes of CO2 equivalent, and Scope 2 emissions (from purchased grid and generator-supplemented electricity) of 8,500 tonnes of CO2 equivalent on a location-based method.

Facts

Workings

Total Scope 1 and Scope 2 emissions disclosed: 12,000 + 8,500 = 20,500 tCO2e

These are disclosed separately (not combined into a single figure) as required by IFRS S2, with the location-based Scope 2 method identified.

Climate scenario analysis reflecting Nigeria-specific physical risk

A Nigerian agribusiness with significant operations in a flood-prone region performs climate scenario analysis under IFRS S2, adapting a global climate scenario model to reflect Nigeria-specific flooding frequency and severity projections, and concludes that under a higher-warming scenario, a material portion of its farmland faces increased flood risk over the medium term.

Facts

Workings

The entity documents the scenario analysis methodology, the adaptation made to reflect Nigeria-specific flooding data, the time horizon considered (medium term), and the conclusion regarding material flood risk exposure to its farmland assets under the assessed scenario.

Sources & citations

  1. [S1]IFRS S2 Climate-related Disclosures — IFRS Foundationaccessed 2026-07-18
  2. [S2]ISSB issues IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures — BDO Globalaccessed 2026-07-18
  3. [S3]IFRS - Use of IFRS Standards by jurisdiction: Nigeria — IFRS Foundationaccessed 2026-07-18
  4. [S4]FRC Releases Roadmap Report for Adoption of IFRS Sustainability Disclosure Standards in Nigeria — Financial Reporting Council of Nigeriaaccessed 2026-07-18
  5. [S5]Roadmap Report for Adoption of IFRS Sustainability Disclosure Standards in Nigeria (Amended 2026) — Financial Reporting Council of Nigeriaaccessed 2026-07-18
  6. [S6]Monetary Policy Decisions — Central Bank of Nigeriaaccessed 2026-07-18
  7. [S_TAX1]Nigeria Tax Act, 2025 has been signed – highlights — EY Globalaccessed 2026-07-18
  8. [S_TAX2]Nigeria's 2025 Tax Reform Acts Explained: Key Changes — Baker Tilly Nigeriaaccessed 2026-07-18
Last reviewed 2026-07-18 · Reviewer: Rafiu Olawuyi, FCA (Author / Technical Reviewer)