ISSB IFRS S2 Climate-Related Disclosures 1 — Questions and Answers
Question 1: What is the primary objective of IFRS S2 Climate-related Disclosures?
- To require entities to disclose information about climate-related risks and opportunities that is useful to investors (Correct answer)
- To mandate net-zero commitments from all publicly listed companies
- To set emission reduction targets for entities by industry sector
- To replace national climate reporting regulations with a single global standard
Correct answer: To require entities to disclose information about climate-related risks and opportunities that is useful to investors
IFRS S2 requires climate-related disclosures useful to primary users of general purpose financial reports in making decisions about the entity.
Question 2: Under IFRS S2, what are the two categories of climate-related risks that entities must address?
- Physical risks and transition risks (Correct answer)
- Regulatory risks and reputational risks
- Short-term and long-term risks
- Domestic and international risks
Correct answer: Physical risks and transition risks
IFRS S2 distinguishes between physical risks (acute and chronic) and transition risks arising from the shift to a lower-carbon economy.
Question 3: Which greenhouse gas protocol does IFRS S2 require entities to use for measuring GHG emissions?
- The Greenhouse Gas Protocol Corporate Standard (Correct answer)
- ISO 14064 exclusively
- The EPA Mandatory Reporting Rule methodology
- Any nationally recognized GHG quantification standard
Correct answer: The Greenhouse Gas Protocol Corporate Standard
IFRS S2 requires use of the GHG Protocol Corporate Standard to measure and disclose Scope 1, 2, and 3 GHG emissions.
Question 4: Under IFRS S2, which Scope of GHG emissions is subject to a transition relief provision on first adoption?
- Scope 3 emissions — entities may omit Scope 3 in the first year of applying IFRS S2 (Correct answer)
- Scope 1 emissions — stationary combustion may be deferred
- Scope 2 emissions — market-based accounting may be deferred
- All Scopes — full deferral is permitted for one year
Correct answer: Scope 3 emissions — entities may omit Scope 3 in the first year of applying IFRS S2
IFRS S2 grants a one-year transition relief allowing entities to omit Scope 3 GHG emissions disclosures in the first reporting period.
Question 5: What does IFRS S2 require entities to disclose about their use of carbon credits?
- Whether and how the entity uses carbon credits, the type, and how they contribute to climate-related targets (Correct answer)
- Only the total monetary value of carbon credits purchased
- Carbon credit disclosures are optional under IFRS S2
- Only carbon credits from UN-certified offsetting programs need disclosure
Correct answer: Whether and how the entity uses carbon credits, the type, and how they contribute to climate-related targets
IFRS S2 requires transparency about carbon credit use, including whether credits represent removals or reductions and third-party verification status.
Question 6: Under IFRS S2, what cross-industry metric must all entities disclose regardless of sector?
- Absolute gross Scope 1, 2, and 3 GHG emissions expressed in metric tonnes of CO2 equivalent (Correct answer)
- Total energy consumption in megawatt-hours
- Percentage of revenue from green products and services
- Number of employees in climate-related roles
Correct answer: Absolute gross Scope 1, 2, and 3 GHG emissions expressed in metric tonnes of CO2 equivalent
IFRS S2 requires all entities to disclose absolute gross GHG emissions for Scopes 1, 2, and 3 as a universal cross-industry metric.
ISSB IFRS S2 Climate-Related Disclosures 1
What is the primary objective of IFRS S2 Climate-related Disclosures?