IFRS S1 and S2 Sustainability Standards

What it is about

Gustavo Arias, Audit and Assurance partner at Deloitte Costa Rica, presented at the Second Annual Risk Conference (September 2024) the IFRS S1 and S2 Sustainability Standards and how to prepare to apply them.

The 33-slide presentation explains the global context of sustainability reporting, the evolution of non-financial regulatory reporting (European Union, United States and the ISSB), the objectives of IFRS S1 (general requirements) and IFRS S2 (climate-related disclosures), their four disclosure pillars, greenhouse gas metrics and the steps to align with the standards.

Objectives

• Explain the objective and scope of IFRS S1 and S2.
• Detail what an entity must disclose on governance, strategy, risk management and metrics and targets.
• Propose the steps for organizations to align with the new requirements.

Key takeaways

1. IFRS S1 requires disclosure of significant sustainability-related risks and opportunities; IFRS S2 focuses on climate-related risks and opportunities.
2. Disclosures are organized into four pillars: governance, strategy, risk management, and metrics and targets.
3. Climate metrics include absolute gross greenhouse gas emissions in tonnes of CO2 equivalent and whether climate is considered in executive remuneration.
4. Alignment steps begin with a gap analysis against the standards, followed by a strategy and action plan to close the gaps.
5. Benefits cited include better access to capital and cheaper financing when ESG indicators are met, and the TCFD framework is presented as a starting point.