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TAC Public Meeting January 2026 Paper 5: Finalisation of the TAC’s supplementary advice
Executive summary
| Date | 19 January 2026 |
| Paper reference | 2026-TAC-00 |
| Project | Technical assessment of IFRS S1 and IFRS S2 |
| Topic | Finalisation of the TAC's supplementary advice |
Objective of the paper
This paper presents the draft supplementary advice that will be submitted to the Secretary of State for Business and Trade in relation to the endorsement of IFRS S1 and IFRS S2. This advice focuses on three topics, including additional assessment of the requirements relating to revising comparatives and financed emissions, and a technical assessment of the IFRS S2 amendments issued by the ISSB in December 2025.
Decisions for the TAC
The TAC is asked to approve the supplementary advice.
Appendices
- Appendix 1: Technical assessment of ISSB amendments to IFRS S2
- Appendix 2: Amendments to IFRS S2 Climate-related Disclosures
- Appendix 3: Excerpts from IFRS S1 and IFRS S2
- Appendix 4: Supplementary technical analysis on IFRS S1 and IFRS S2
This paper has been prepared by the Secretariat for the UK Sustainability Disclosure Technical Advisory Committee (TAC) to discuss in a public meeting. This paper does not represent the views of the TAC or any individual TAC member.
This publication contains copyright material of the IFRS Foundation® (Foundation). All rights reserved. Reproduced and distributed by the Financial Reporting Council (FRC) in its role as the secretariat for the UK Sustainability Disclosure Technical Advisory Committee (TAC) with the permission of the Foundation. No rights granted to third parties without permission of the Foundation and the TAC. For more information about the Foundation and the rights to use its materials please visit www.ifrs.org
Context
1In the December 2025 meeting, the TAC was asked to supplement its endorsement recommendations by providing additional technical assessment on two specific requirements in the IFRS Sustainability Disclosure Standards (revising comparatives and financed emissions). This additional assessment supplements the TAC's initial assessment and advice provided to the Secretary of State for Business and Trade (SoS) in December 2024.
2Based on the decisions made in the December 2025 meeting, this paper presents the final draft of the endorsement advice that will be submitted to the SoS.
3In addition, in December 2025 the International Sustainability Standards Board (ISSB) issued its Amendments to IFRS S2 Climate-related Disclosures which makes targeted amendments to both IFRS S2 Climate-related Disclosures (IFRS S2) and its Basis for Conclusions. These amendments were made following the ISSB's consultation on its Exposure Draft issued in April 2025 (April 25 ED) to which the TAC responded.
4The TAC has been commissioned by the Department of Business and Trade (DBT) to conduct a technical assessment of the amendments to IFRS S2 and to provide endorsement advice to the SoS. This paper presents a technical assessment of these amendments and draft advice to the SoS.
ISSB amendments to IFRS S2
5By way of high-level summary, targeted amendments to IFRS S2:
- clarify that an entity is permitted to limit measurement and disclosure of Scope 3 Category 15 GHG emissions to financed emissions as defined in IFRS S2.
- permit use of alternative classification systems—beyond the Global Industry Classification Standard—to disaggregate information about financed emissions.
- clarify availability of the jurisdictional relief from using the GHG Protocol Standard, if only part of an entity is required to use a different method for measuring GHG emissions.
- introduce a jurisdictional relief from using GWP values from the latest Intergovernmental Panel on Climate Change (IPCC) Assessment Report for converting GHG emissions.
- are effective from 1 January 2027 but early application is permitted.
6The full tracked change amendments issued by the ISSB, and further extracts from IFRS S1 and IFRS S2, are presented in Appendix 2 and 3 for the TAC's reference.
7An overview of amendments to IFRS S2 is presented in the table in Appendix 1 which also highlights in italics key changes in the final amendments from the April 2025 ED. This table does not consider corresponding SASB amendments that
8were issued at the same time as these are not subject to the endorsement process and are not being considered by the TAC.
9This table includes a technical assessment of the amendments which draws principally on the TAC's response to the ISSB's April 2025 ED (including the underlying stakeholder feedback), and where relevant, the TAC's endorsement advice from December 2024. Overall, no significant issues were observed.
10The table also contains the TAC Secretariat's proposals with regards to endorsement. Based on the technical assessment, the TAC Secretariat propose that the TAC recommends that the UK Government adopt the ISSB's amendments to IFRS S2 into UK SRS, except for those relating to ‘Effective date' and 'Transition' (adjusting comparatives).
Questions for the TAC
- Does the TAC agree with the technical assessment made in relation to the IFRS S2 amendments issued by the ISSB in December 2025 (as presented in Appendix 1)?
- Does the TAC approve the supplementary advice to the SoS as presented in Appendix 4?
Appendix 1: Technical assessment of ISSB amendments to IFRS S2
| Topic | Key features
Financial Reporting Council31Additionally, further information was obtained from stakeholders through the UK Government's consultation on the draft UK SRS. Despite the implications for connectivity, most stakeholders agreed with the approach that banks are currently taking to calculate and disclose financed emissions data using the prior year balance sheet.The Financial Reporting Council (FRC) is the UK's independent regulator for corporate reporting and governance. Its functions are to:
- set high standards in corporate governance and reporting;
- monitor and enforce those standards; and
- oversee the regulatory activities of the professional accountancy bodies.
In order to fulfil its responsibilities, the FRC has issued codes and standards covering corporate governance, audit, actuarial work and accounting, as well as an Ethical Standard for auditors.
This paper represents the views of the TAC Secretariat and not necessarily those of the FRC, which is the body that appoints the TAC and to which the TAC makes its recommendations.
32TAC members have conflicting views on whether IFRS S2 requires an amendment. However, there are matters that the TAC broadly agrees on, including that:
- financed emissions are challenging to calculate and require a high amount of estimation leading to significant measurement uncertainty.
- the underlying emissions data from counterparties will always be delayed.
- the preferred approach would be for entities to report financed emissions information that covers the same reporting period as the related financial statements, which facilitates connectivity.
- it is expected that over time systems, methodologies and data used to calculate financed emissions will improve shortening the time needed to finalise the required calculations.
33In accordance with the TAC's Terms of Reference, the TAC can only propose an amendment to a IFRS Sustainability Disclosure Standard if:
- changes are considered necessary for the effective application of the IFRS Sustainability Disclosure Standard within a UK context;
- a failure to amend an IFRS Sustainability Disclosure Standard would be of detriment to the long-term public good in the UK, taking into consideration the matters in Section A, paragraph 9; or
- changes are desirable, to build upon the material provided within the global baseline provided by a IFRS Sustainability Disclosure Standard.
The TAC may only propose amendments under this condition upon request from DBT or where UK stakeholders raise a strong need.
34Responding to DBT's request to further assess this issue based on strong concerns raised by stakeholders, the TAC agree that a mechanism within the standard specifically for financed emissions could be helpful. This mechanism would not amend the ambition of the requirements and gives financial institutions additional time to allow data and systems to improve so that they are able to fully comply with the requirements in the future. If DBT decides that an amendment is necessary, the TAC recommend inserting the following suggested text into IFRS S2 (the amended text in black is from the ISSB's revised version of IFRS S2 as issued in December 2025 and the suggested wording from the TAC is in red):
B59Paragraph 29(a)(i)(3) requires an entity to disclose its absolute gross Scope 3 greenhouse gas emissions generated during the reporting period, including upstream and downstream emissions. An entity that participates in one or more of the following financial activities is required to disclose additional and specific information about its financed emissions (which are part of Category 15 greenhouse gas emissions): Category 15 emissions or those emissions associated with its investments which is also known as 'financed emissions':
- asset management (see paragraph B61);
- commercial banking (see paragraphs B62–B62A); and
- insurance (see paragraphs B63–B63A).
B59AIn cases when an entity determines it is impracticable to reliably estimate its financed emissions for the reporting period using the loans and investments amounts as reported in the related financial statements, the entity shall disclose:
- an explanation of why it cannot reliably estimate its financed emissions using the loans and investments amounts as reported in the related financial statements; and
- an explanation of any steps being taken or planned to be taken, including the timeline, to be able to report these financed emissions disclosures.
B60An entity shall apply the requirements for disclosing greenhouse gas emissions in accordance with paragraph 29(a) when disclosing information about its financed emissions.
35Although the recommended mechanism is not timebound within the standard, the TAC recommends that DBT consider whether to maintain it when reviewing the standards in the future. The TAC recommends the mechanism is added to the standard in a separate paragraph so that it can be easily removed if or when it is no longer considered necessary. We understand that the ISSB will reconsider the requirements for financed emissions in the future (although there are no confirmed timelines), and this could be a good time for DBT to assess whether the mechanism is still necessary.
IFRS S2 amendments issued by the ISSB
Endorsement recommendation
36This is a new endorsement recommendation. Additionally, this recommendation replaces the TAC's previous recommendation to amend the GICS requirement.
37The TAC recommends that the UK Government adopts the following ISSB amendments to IFRS S2 as issued in December 2025 into UK SRS without amendment. These amendments:
- clarify that an entity is permitted to limit measurement and disclosure of Scope 3 Category 15 GHG emissions to financed emissions as defined in IFRS S2.
- permit use of alternative classification systems—beyond the Global Industry Classification Standard—to disaggregate information about financed emissions.
- clarify availability of the jurisdictional relief from using the GHG Protocol Standard, if only part of an entity is required to use a different method for measuring GHG emissions.
- introduce a jurisdictional relief from using GWP values from the latest Intergovernmental Panel on Climate Change (IPCC) Assessment Report for converting GHG emissions.
- include consequential amendments to transition provisions (relating to not being required to report scope 3 emissions in the first reporting period)
38The TAC does not consider it necessary to adopt amendments on:
- effective date as this will be set out in UK SRS at the outset.
- transition (adjusting comparatives) as UK SRS are not currently effective and yet to be issued. Entities will not therefore have been obliged to report under IFRS S2, with the effect that this would obviate any need to revise comparative information. Those entities that have instead elected to voluntarily report under the ISSB's IFRS S2, may elect to voluntarily use this mechanism to maintain compliance with this framework.
Additional recommendations and observations
39There are no additional recommendations and observations.
Technical assessment and deliberations
40The TAC engaged with and responded to the ISSB's consultation on the proposed amendments to IFRS S2 in June 2025. This included conducting stakeholder engagement with a variety of UK stakeholders. The TAC's significant concerns that were surfaced during this consultation have been addressed by the ISSB in its final amendments.
41Notably, the TAC strongly disagreed with the requirement for financial institutions to disaggregate financed emissions using the Global Industry Classification Standard (GICS). Subsequently, the ISSB has made further changes which allow
42entities to select an industry classification system that will result in information that enables report users to understand an entity's exposure to climate transition risks. This aligns with the TAC's original endorsement recommendations from December 2024. Therefore, the TAC is revising its initial endorsement recommendation and no longer recommends any further amendments to IFRS S2 (other than the amendments already made by the ISSB).
43The TAC agree that it would be unnecessary to adopt amendments to the effective date and transition (adjusting comparatives) as UK SRS will specify an effective date at the outset and are not currently effective and yet to be issued. Entities will not therefore have been obliged to report under IFRS S2, with the effect that this would obviate any need to revise comparative information. Those entities that have instead elected to voluntarily report under the ISSB's IFRS S2 may elect to voluntarily use this mechanism to maintain compliance with this framework.
Footnotes
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New paragraph 29 (A) states 'That is, the entity is permitted to limit its Category 15 greenhouse gas emissions to emissions attributed to loans and investments made by the entity to investees or counterparties. 'Loans and investments' include loans, project finance, bonds, equity investments and undrawn loan commitments. For an entity that participates in asset management activities, financed emissions include greenhouse gas emissions attributed to assets under management. For the purpose of the limitation, an entity is permitted to exclude greenhouse gas emissions attributable to derivatives.' Amended BC129 further elaborates by stating 'Financed emissions are defined as 'the portion of gross greenhouse gas emissions of an investee or counterparty attributed to the loans and investments made by an entity to the investee or counterparty'. Financed emissions are a subset of Scope 3 Category 15 greenhouse gas emissions. In Amendments to Greenhouse Gas Emissions Disclosures, issued in December 2025, the ISSB clarified that although emissions associated with an entity's insurance or reinsurance underwriting activities are Category 15 greenhouse gas emissions, these emissions do not meet the definition of financed emissions. Considering the definition of financed emissions, paragraph BC129 could be more specifically phrased to state that the ISSB confirmed that IFRS S2 requires 'Category 15 greenhouse gas emissions' disclosure for only financial activities associated with an insurer's loans and investments.' ↩
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The ISSB acknowledged respondents' concerns about the absence of a definition of 'financial activities' for the purpose of applying paragraph 29B(b). However, the ISSB noted that the use of this term in IFRS S2 and the Basis for Conclusions on IFRS S2 supports an understanding that 'financial activities' refers to activities that are associated with Category 15 greenhouse gas emissions. ↩