The content on this page has been converted from PDF to HTML format using an artificial intelligence (AI) tool as part of our ongoing efforts to improve accessibility and usability of our publications. Note:
- No human verification has been conducted of the converted content.
- While we strive for accuracy errors or omissions may exist.
- This content is provided for informational purposes only and should not be relied upon as a definitive or authoritative source.
- For the official and verified version of the publication, refer to the original PDF document.
If you identify any inaccuracies or have concerns about the content, please contact us at [email protected].
FRC’s Response to Exposure Draft ISSB/ED/2025/2 Proposed Amendments to the Industry-based Guidance on Implementing IFRS S2
Emmanuel Faber ISSB Chair IFRS Foundation Opernplatz 14 60313 Frankfurt am Main Germany
27 November 2025
Re: Exposure Draft ISSB/ED/2025/2 Proposed Amendments to the Industry-based Guidance on Implementing IFRS S2
Dear Emmanuel,
The Financial Reporting Council (FRC) welcomes the opportunity to provide comments on the International Sustainability Standards Board (ISSB)'s Exposure Draft ISSB/ED/2025/2 Proposed Amendments to the Industry-based Guidance on Implementing IFRS S2 (IFRS S2 IG Exposure Draft).
This letter sets out our key points for consideration.
The purpose of the FRC is to serve the public interest and support UK economic growth by upholding high standards of corporate governance, corporate reporting, audit and actuarial work. The comments in this letter are based on the FRC's extensive experience in standard-setting, including in issuing accounting, audit, assurance and actuarial standards, in addition to setting the UK Corporate Governance Code and Stewardship Code.
The FRC is responsible for providing the Secretariat for the UK Sustainability Disclosure Technical Advisory Committee (TAC). The TAC is an independent expert advisory body, established by the UK Government and formed of a chair and members from a range of relevant professional backgrounds. The TAC provides recommendations to the Secretary of State for the Department for Business and Trade for endorsing the IFRS Sustainability Disclosure Standards for use in the UK.
The FRC is also responsible for developing financial reporting standards applicable in the UK and Republic of Ireland, developing the Guidance on the Strategic Report and overseeing the UK Accounting Standards Endorsement Board (UKEB)'s adherence to due process.
Our response reflects this range of interests in and experience of the activities of the IFRS Foundation. It should be read alongside the TAC's response to Exposure Draft ISSB/ED/2025/2 Proposed Amendments to the Industry-based Guidance on Implementing IFRS S2 and both the FRC's and TAC's responses to Exposure Draft SASB/ED/2025/1: Proposed Amendments to the SASB Standards (SASB ED). These have been developed following the discussions of TAC members in public meetings. Our response takes into account the views of UK stakeholders.
The FRC, in its role as Secretariat for the TAC, conducted outreach and research activities, drafted papers, and summaries, and lead the drafting of the TAC's response to the IFRS S2 IG Exposure Draft.
Our overall view is that we welcome the ISSB's continued efforts to both minimise confusion for both preparers and investors, and limit disruption and costs for preparers through its proposal to make consequential amendments to the Industry-based Guidance in Implementing IFRS S2 IFRS S2 (IFRS S2 Guidance) concurrently with updates to the SASB Standards. We have set out points below for consideration in relation to the IFRS S2 IG Exposure Draft.
1. Do you agree that the ISSB should make consequential amendments to the IFRS S2 industry-based guidance when it makes amendments to the SASB Standards as set out in the SASB exposure draft? Why or why not?
We support the principle of making climate-related consequential amendments to the IFRS S2 Guidance concurrently with updates to the SASB Standards. We believe this approach is conducive to maintaining alignment between the two frameworks and that this in turn can help minimise both costs and confusion. However, we would like to share the following observations in relation to the IFRS S2 IG Exposure Draft:
The TAC's recommendations on climate components of the SASB ED
Our 'in principle' support for consequential amendments to the IFRS S2 IG Exposure Draft should be read in the context of the FRC's response letter to the SASB ED as well as the TAC's climate-related commentary in its response letter to the SASB ED. This includes the following points:
- The need to adopt a proportionate, simplified, and principles-based approach that is consistent with IFRS S2, including its approach to materiality and judgement. This should be underpinned by connectivity with financial statements and international applicability.
- The general need to restructure the SASB Standards to distinguish between core disclosures, industry agnostic disclosures, and industry specific disclosures, with climate-related components of SASB Standards and therefore linked IFRS S2 Guidance instead focusing specifically on climate-related industry specific disclosures, and those remaining climate-related core and industry-agnostic disclosures instead integrated into IFRS S2.
- The desirability of a climate-first thematic approach. This, combined with the principles-based approach referred to above, could help limit continual updates to the IFRS S2 Guidance.
- The case for the ISSB considering the inclusion/exclusion of climate-related disclosure topics, such as energy and water management.
- The importance of adding metrics on Scope 3 greenhouse gas emissions to Standards in the Extractives & Minerals Processing sector.
- The merits of a judgement-based approach, based on principles, rather than prescription as regards the disclosure of Scope 1 methane emissions.
Clarity and Transparency
We believe that the IFRS S2 IG Exposure Draft and its accompanying Basis for Conclusions would have benefited from greater clarity around the ISSB's approach to making consequential amendments. Specifically, it would have been helpful if the ISSB had:
- Explicitly listed the proposed amendments by industry standard and volume in the IFRS S2 IG Exposure Draft.
- Included the metric code and the metric description.
- Noted whether the topic/metric is currently included within the current IFRS S2 Guidance.
- Provided a more detailed explanation of its general approach to making consequential amendments.
- Included explanatory commentary on consequential amendments relating to water management in the light of more limited market maturity and understanding of this area. This could have aided stakeholder understanding of the ISSB's views on the potential linkages between climate-related risks and opportunities and water issues.
The IFRS S2 IG Exposure Draft instead presents only metric numbers disaggregated by sector. This is accompanied by only a limited explanation of these amendments in the accompanying Basis for Conclusions. This lack of transparency in the ISSB's underlying approach makes it more challenging to both efficiently and adequately assess proposed revisions. Moreover, greater elaboration and specificity of this kind could also have helped the ISSB to both identify and address any potential inconsistencies and omissions.
Completeness of amendments
We note that some of the metrics that the ISSB classifies as climate-related metrics, through inclusion in the IFRS S2 Guidance, appear to be missing from the IFRS S2 IG Exposure Draft table of amendments. Incomplete consequential amendments create methodology gaps affecting sustainability disclosures and financial statement judgements. These missing metrics are detailed in the table contained within the TAC's response letter to the IFRS S2 IG Exposure Draft along with additional clarificatory suggestions, together with SASB metrics that we consider could be 'climate-related'. We recommend that the ISSB reviews these metrics and addresses all missing climate-related amendments with a view to also ensuring that the alignment objective with the SASB ED is comprehensively achieved. We also recommend that the ISSB clarifies its climate-related boundary and omits any broader sustainability metrics from the updated IFRS S2 Guidance.
Restatement and comparatives
Finally, we note that the Basis for Conclusions and IFRS S2 IG Exposure Draft do not address the approach to restatements resulting from amendments to the IFRS S2 IG. Given that IFRS S1 requires disclosure of comparative information in respect of the preceding period for all amounts disclosed in the reporting period, where Guidance changes between periods, it remains unclear as to whether companies would need to restate the prior year or disclose current and prior periods using different methodologies. To ensure consistency and comparability for users, we suggest that the ISSB coordinates with the International Accounting Standards Board on the establishment of a clear restatement protocol.
2. Do you agree with the proposed approach for setting the effective date of the amendments and permitting early application? Why? Or why not?
We agree with the proposed approach to determine the effective date following consultation feedback. We support an effective date of at least 18 months after the amendments are issued, with the option of early application.
We believe that the above timeline aligns well with annual reporting cycles and provides preparers with sufficient lead time to update internal systems and processes. It would also support jurisdictions that rely on translated versions of the guidance, allowing for consistent implementation across regulatory frameworks.
We appreciate the ISSB's commitment to stakeholder engagement, and we look forward to continued collaboration with the ISSB, going forward. If you have any queries or would like to discuss our comments in more detail, please do not hesitate to contact me or Sarah-Jayne Dominic at [email protected].
Yours sincerely
Mark Babington Executive Director, Regulatory Standards Direct telephone line: 020 7492 2323 Email: [email protected]
London office: 13th Floor, 1 Harbour Exchange Square, London, E14 9GE Birmingham office: 5th Floor, 3 Arena Central, Bridge Street, Birmingham, B1 2AX T: +44 (0)20 7492 2300 | [email protected] | www.frc.org.uk
The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered office: as above. Please see our privacy page at https://www.frc.org.uk/about-the-frc/procedures-and-policies/privacy-the-frc if you would like to know more about how the FRC processes personal data or if you would like to stop receiving FRC news, events, outreach or research related communications.