ISSB Guide 3 — Questions and Answers
Question 1: What are the four core disclosure pillars that IFRS S2 shares with the TCFD framework?
- Governance, Strategy, Risk Management, and Metrics & Targets (Correct answer)
- Environment, Social, Governance, and Financial Performance
- Physical Risks, Transition Risks, Policy Risks, and Market Risks
- Short-term, Medium-term, Long-term, and Perpetual Impacts
Correct answer: Governance, Strategy, Risk Management, and Metrics & Targets
IFRS S2 is structured around the same four pillars as the TCFD recommendations: Governance, Strategy, Risk Management, and Metrics & Targets.
Question 2: Which warming scenario does IFRS S2 guidance specifically reference for climate scenario analysis?
- 1.0°C scenario aligned with pre-industrial baselines
- 2.0°C scenario from the Kyoto Protocol
- 1.5°C scenario consistent with Paris Agreement ambitions (Correct answer)
- 3.0°C business-as-usual scenario
Correct answer: 1.5°C scenario consistent with Paris Agreement ambitions
IFRS S2 explicitly references a 1.5°C global warming scenario as one entities should consider when conducting climate scenario analysis.
Question 3: Under IFRS S2, how are Scope 3 greenhouse gas emissions defined?
- Direct emissions from owned or controlled sources
- Indirect emissions from purchased electricity and heat
- All other indirect emissions occurring across the value chain (Correct answer)
- Emissions from government-owned infrastructure used by the entity
Correct answer: All other indirect emissions occurring across the value chain
Scope 3 covers all indirect GHG emissions not included in Scope 1 or 2, arising from upstream and downstream activities in the entity's full value chain.
Question 4: Which of the following is classified as a 'physical risk' under IFRS S2?
- Costs of transitioning to a low-carbon business model
- Policy and regulatory changes related to climate legislation
- Acute and chronic climate hazards such as floods and rising temperatures (Correct answer)
- Reputational damage from climate-related litigation
Correct answer: Acute and chronic climate hazards such as floods and rising temperatures
Physical risks include acute events (e.g., extreme weather) and chronic shifts (e.g., sea-level rise and temperature increases) that can affect an entity's assets and operations.
Question 5: According to IFRS S2 guidance, what is a 'climate-related opportunity'?
- A derivative financial instrument linked to carbon prices
- A potential positive effect arising from climate change or the response to it (Correct answer)
- A government grant awarded for sustainability reporting compliance
- A carbon credit purchased to neutralize Scope 1 emissions
Correct answer: A potential positive effect arising from climate change or the response to it
Climate-related opportunities are potential positive outcomes — such as new markets, resource efficiency, or new products — arising from climate change or the shift to a lower-carbon economy.
Question 6: Which metric category does IFRS S2 require all entities to disclose, regardless of industry?
- Water consumption and biodiversity impact metrics
- Social equity and climate justice metrics
- Cross-industry climate metrics including GHG emissions (Scopes 1, 2, and material Scope 3) (Correct answer)
- Customer-facing carbon footprint labeling metrics
Correct answer: Cross-industry climate metrics including GHG emissions (Scopes 1, 2, and material Scope 3)
IFRS S2 mandates cross-industry climate metrics for all entities, most notably GHG emissions across applicable scopes, as a universal baseline.
Question 7: What is the purpose of SASB Standards as referenced within IFRS S2 guidance?
- To replace IFRS S2 for entities in specific regulated industries
- To provide industry-specific metrics as a starting point for sustainability disclosures (Correct answer)
- To set legally binding GHG reduction targets by sector
- To establish financial accounting rules for carbon assets on the balance sheet
Correct answer: To provide industry-specific metrics as a starting point for sustainability disclosures
SASB Standards are referenced in IFRS S2 as a source of industry-specific metrics that can serve as a practical starting point when identifying relevant sustainability disclosures.
ISSB Guide 3
What are the four core disclosure pillars that IFRS S2 shares with the TCFD framework?