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Letter to Secretary of State for Business and Trade: Supplementary analysis for the UK endorsement of IFRS S1 and IFRS S2
The Rt Hon Peter Kyle MP Secretary of State for Business and Trade Department for Business and Trade Old Admiralty Building Admiralty Place Whitehall London SW1A 2DY
26 January 2026
Supplementary analysis for the UK endorsement of IFRS S1 and IFRS S2
Dear Peter,
It is my pleasure to provide you with the UK Sustainability Disclosure Technical Advisory Committee (TAC)'s supplementary recommendations on the endorsement of the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB). The recommendations presented in the Appendix supplement the TAC's advice submitted to Jonathan Reynolds, then Minister of State for Business and Trade, on the 18 December 2024.
Overall, the TAC's endorsement conclusions remain the same. That being that the endorsement of both IFRS S1 and IFRS S2, for the creation of UK Sustainability Reporting Standards, meet the endorsement criteria and would be conducive to the long-term public good in the UK. This conclusion also extends to targeted amendments made by the ISSB to IFRS S2 in December 2025, except for amendments to the effective date and transition in relation to adjusting comparatives.
The TAC has provided additional analysis and has modified two of our specific recommendations relating to the requirements to revise comparatives and the requirements on financed emissions. These modified recommendations are presented in the Appendix to this letter.
We look forward to further engagement with you and your officials and continue to offer our support on the implementation of UK Sustainability Reporting Standards.
Yours sincerely,
Sally Duckworth Chair of the UK Sustainability Disclosure TAC Email: [email protected]
Appendix: Supplementary technical analysis on IFRS S1 and IFRS S2
In December 2024, the UK Sustainability Disclosure Technical Advisory Committee (TAC) published its technical analysis and endorsement recommendations relating to the two IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB): IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and IFRS S2 Climate-related Disclosures (IFRS S2).
Since the publication of this technical analysis and endorsement recommendations, further information was made available which necessitated the TAC to revisit its initial recommendations and conduct supplementary analysis. This new information was predominantly obtained from stakeholders who responded to the UK Government's consultation on the draft UK Sustainability Reporting Standards (UK SRS) which closed in September 2025.
Additionally, the ISSB published amendments to IFRS S2 in December 2025. Before incorporating these amendments into UK SRS, the Department for Business and Trade (DBT) requested the TAC complete a technical assessment on these amendments.
Based on the additional information and the ISSB's amendments to IFRS S2, the TAC has been commissioned to provide additional analysis on three specific topics:
- Revising comparatives due to changes in estimates
- Financed emissions – using prior year balance sheet
- Amendments to IFRS S2 as issued by the ISSB in December 2025
The TAC would like to confirm that the overall endorsement recommendation is unchanged. That being, the endorsement of both IFRS S1 and IFRS S2 for the creation of UK Sustainability Reporting Standards meet the endorsement criteria as set out in the Terms of Reference.
Based upon the further information, additional analysis and assessment, the TAC would like to modify its specific recommendations and add supplementary analysis relating to revising comparatives and financed emissions. These modifications are detailed below.
The TAC recommends that UK Government adopt the ISSB's amendments to IFRS S2 into UK SRS, except for those relating to 'Effective date' and 'Transition' (adjusting comparatives). Further details about the TAC's analysis and recommendations are presented below.
The TAC has continued to assess the requirements in IFRS S1 and IFRS S2 using the assessment criteria set out in the Terms of Reference. This includes the criteria for proposing an amendment to the standards.
Judgements, uncertainties and errors, including revising comparatives
Endorsement recommendation
The endorsement recommendations remain unchanged. That being, the requirements are maintained without amendment.
Additional recommendations and observations
An additional recommendation has been added, as follows:
The TAC recommends that the ISSB provide a statement to emphasise that an entity is not necessarily required to revise comparatives when it identifies new information in relation to an estimated amount, if the revision to the comparative amount does not provide material information that is useful to primary users and is capable of influencing their decisions. This statement should take into consideration the similar one used in the simplified European Sustainability Reporting Standards (ESRS) which also highlights an example of when the estimation methodology for the relevant metric relies systematically on inputs from previous periods. Recognising that this statement from the ISSB might not be available before UK SRS is issued, the TAC also recommends that the UK Sustainability Disclosure Policy and Implementation Committee (PIC) or DBT should provide this statement when issuing UK SRS.
Technical assessment and deliberations
Further to the initial assessment undertaken in 2024, the TAC recognises the concern raised about the requirement in IFRS S1 paragraph B50 to revise comparatives due to changes in estimates if new information is identified which provides evidence of circumstances that existed in that period. In particular, stakeholders that responded to questions on financed emissions in the UK Government's consultation on the draft UK SRS noted that on this basis, financed emissions comparatives will likely need to be revised every year, which would be highly burdensome and will have limited additional benefit to (internal and external) users for their decision making.
In its initial technical assessment and deliberations, the TAC recognised that the requirements to revise comparatives for estimated amounts may be challenging to apply. In particular, the TAC noted that all Scope 3 emissions reporting, including financed emissions, is subject to significant use of estimates as nearly all data is reliant on information received from entities in the value chain. This is likely to make revising comparatives very difficult. The TAC also expressed concerns around the requirements to revise data collected from different reporting periods (especially from the value chain) as this information might introduce significant costs for limited decision-useful insight, especially as this information might not be used for strategic decision-making and may ultimately not be useful for primary users.
The TAC acknowledges that the concept of materiality applies to this requirement. Therefore, if an entity concludes that the revised information is not decision-useful, then they would not be required to disclose this information in accordance with IFRS S1. To alleviate stakeholder concerns, the TAC recommends that a statement is provided by the ISSB that emphasises this point.
In November 2025, the European Financial Reporting Advisory Group (EFRAG) published its simplified ESRS. ESRS 1 now includes a statement (AR 38 for paragraph 85(b)) which notes that entities do not need to revise comparatives if the information does not provide useful information, with an example of when an estimation methodology systematically relies on data from a previous period. The ISSB could take inspiration from this new addition to ESRS 1 and build upon material in IFRS S1 (notably paragraph D17(a)) and its Basis for Conclusions (notably paragraphs 150 and 152) to emphasise that an entity does not need to revise comparative amounts if the information is not material. The TAC would encourage the ISSB to collaborate with EFRAG to ensure any wording on this matter is aligned to aid interoperability and reduce burdens for those reporting information using ESRS and ISSB standards.
The ISSB is unlikely to be able to provide such a statement before UK SRS are issued, and therefore the TAC also recommends that the PIC or DBT should provide a statement that reminds stakeholders of the provisions that exist within the standards when issuing UK SRS.
Greenhouse gas emissions: financed emissions
Endorsement recommendation
Based on the supplementary analysis, the TAC has revised its endorsement recommendation.
Based on the amendments to IFRS S2 as issued by the ISSB in December 2025, the TAC withdraws its initial recommendation to amend the GICS requirement in IFRS S2. The proposed amendment is no longer necessary as it has now been addressed by the ISSB's amendments. Further analysis of the ISSB's GICS amendment is addressed in our analysis on the IFRS S2 amendments as issued by the ISSB.
In relation to some financial institutions using a prior period balance sheet to calculate financed emissions, the TAC recommends adding a mechanism into IFRS S2 that requires financial institutions to explain why they have not been able to comply with the financed emissions disclosure requirements, including an explanation as to how they intend to comply with the requirements in the future.
It is noted that TAC members have differing views on these recommendations.
Additional recommendations and observations
The additional recommendations and observations remain unchanged.
Technical assessment and deliberations
The TAC's initial technical assessment and deliberations on this topic remain unchanged. However, the endorsement recommendations were subject to written clarification being provided by the ISSB that financial institutions can utilise the proportionality mechanisms in IFRS S2 paragraph B57 to not report financed emissions using loans and investments amounts as at the end of the current reporting period. This was based on the view that it is impracticable for some financial institutions (notably banks) to estimate their financed emissions for the end of the current reporting period due to a compressed timeframe of six to eight weeks between the period end date and the publication date. In absence of this written clarification, the TAC is revising its endorsement recommendation.
Additionally, 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 some banks are currently taking to calculate and disclose financed emissions data using the prior year balance sheet.
TAC 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 is likely to 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, thereby shortening the time needed to finalise the required calculations.
In accordance with the TAC's Terms of Reference, the TAC can only propose an amendment to an 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.
Responding 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. The TAC's recommended amendment is in addition to amendments to IFRS S2 issued by the ISSB in December 2025. 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':
(a) asset management (see paragraph B61); (b) commercial banking (see paragraphs B62–B62A); and (c) insurance (see paragraphs B63–B63A).
B59AWhen an entity determines it is impracticable to reliably estimate its financed emissions for the same reporting period as the related financial statements, the entity shall disclose:
(a) why it cannot reliably estimate its financed emissions for the same reporting period as the related financial statements; (b) the measurement approach, inputs and assumptions used to estimate any financed emissions information reported; and (c) its plan, including the timeline, to be able to report its financed emissions for the same reporting period as the related financial statements.
B60An entity shall apply the requirements for disclosing greenhouse gas emissions in accordance with paragraph 29(a) when disclosing information about its financed emissions.
Although 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 disclosure requirements for financed emissions in the future (although there are no confirmed timelines), and this could be a suitable time for DBT to assess whether the mechanism in UK SRS is still necessary.
IFRS S2 amendments issued by the ISSB
Endorsement recommendation
This is a new endorsement recommendation. Additionally, this recommendation replaces the TAC's previous recommendation to amend the GICS requirement.
The 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 an entity, in whole or in part, 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, if an entity, in whole or in part, is required to use different values.
- include consequential amendments to transition provisions (relating to not being required to report scope 3 emissions in the first reporting period).
The 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.
Additional recommendations and observations
There are no additional recommendations and observations.
Technical assessment and deliberations
The 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.
Notably, 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 entities 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 relating to GICS (other than the amendments already made by the ISSB).
The TAC additionally agrees with the amendment clarifying 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, as its core concerns around disclosure of amounts of excluded derivatives and financial activities, and ongoing monitoring of emissions methodologies have been addressed by the ISSB. The TAC notes by way of supplementary observation that whilst IFRS S2 does not require disclosure of emissions intensity metrics, market practice is to disclose this alongside absolute gross financed emissions metrics under IFRS S2. This is a key transition assessment metric commonly used in transition plans and linked targets.
Similarly, it is supportive of relief provisions in relation to use of the GHG Protocol Standard and GWP values from the latest Intergovernmental Panel on Climate Change (IPCC) Assessment Report as these additional mechanisms address interpretation uncertainties and diverse reporting practices. Transition provisions (relating to not being required to report Scope 3 emissions in the first reporting period) are additionally welcome as consequential amendments arising from TAC-supported amendments to additional financed emissions disclosures.
The TAC agrees 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.