Preparing for IFRS S2 in APAC: Sustainable Business Strategies for Success

In recent times, ESG-related reporting has evolved further than predicted. Countries around the globe showing their collective support regarding the commitment, including the global adoption of IFRS S2 (International Financial Reporting Standards Standard 2) that was released in mid-2023 by ISSB (International Sustainability Standards Board). Half of the world seems to prepare mandatory issuance regarding the framework, while the other half is encouraging issuers to progressively adopting. What about the APAC?

What’s The Difference Between IFRS S2 and TCFD?

You might have heard of Task-Force on Climate-related Financial Disclosure (TCFD) and its four recommended disclosures: Governance, Strategy, Risk Management, as well as Metrics & Targets. Perhaps, the TCFD framework has been incorporated into some parts of your ESG report. However, now you have heard of IFRS S2 that said to be the replacement of TCFD. How much of a work is it?

IFRS S2 has been effectively released in June 2023 and is effectively ready to be adopted since the beginning of 2024. This standard comes with an objective as to require issuers to disclose information on risks and opportunities it encounters and mitigates due to climate-change. Issuers are also obligated to disclose general financial reports as to picture the solid foundation on why such decisions making regarding risks, opportunities, and resources management is taken by the entity.

In its reporting, IFRS S2 requires issuers to inform:

1. climate-related risks to which the entity is exposed, which are: climate-related physical risks, and climate-related transition risks.
2. climate-related opportunities available to the entity.

While it seems to be technically complicated, IFRS S2 actually aligns with the TCFD with few adjustments. Overall, the general purpose is for stakeholders to understand the issuer’s and the entity’s performance in managing their climate-related targets. Therefore, if you already had adopted the TCFD framework reporting climate-change effects to your organisation, the next thing to do is to conduct a scenario analysis workshop to oversee and mitigate the potential risks and opportunities.

During a scenario analysis workshop, you will undergo a one-on-one focus group discussion session with related working-unit to assess the potential risks and opportunities. Furthermore, you can also conduct a climate risk stress test on your business operation if necessary. The result from the workshop and stress analysis will be incorporated into your IFRS S2 framework report.

APAC Countries is Preparing for IFRS S2 Adoption

As stated previously, when it comes to adopting IFRS S2 there is no one-size-fits-all. Every country has their own consideration and issuance on the adoption, mainly due to self-reflection on readiness and plausibility. However, several countries in Asia have publicly mentioned their participation target in incorporating IFRS S2 or generally mandatory climate-related reporting:

1. Hong Kong

Hong Kong Stock Exchange (HKEX) stated that climate-related disclosure will be mandatory for listed companies, effective starting from January 1, 2024 reporting period. 

2. Singapore

Alongside Hong Kong, Singapore through Singapore’s Accounting and Corporate Regulatory Authority (ACRA) has mentioned their mandatory issuance for listed companies to incorporate climate-related risk reporting effective from April 2025.

3. Malaysia

Bursa Malaysia required main market-listed issuers to report climate-related risks and opportunities. However, they are still accepting TCFD as a climate-change reporting framework effective December 31, 2025. ACE Market-listed issuers are also required to disclose a basic transition plan to achieve a low-carbon economy effectively from December 31, 2026.

For financial institution issuers, Bursa Malaysia is currently requiring the issuers to produce TCFD climate-related disclosure beginning January 1, 2024.

4. Indonesia

Indonesia comes as one of the more adaptive countries where issuers have been encouraged to early adopt the IFRS S2 since January 1, 2025. However, TCFD reporting is still sufficient for the next one to two years as the country is still adapting.

Currently, those are four countries that have publicly informed their positioning on facing the IFRS S2 climate-change reporting framework. Though your country now has not made IFRS S2 mandatory, we recommend starting ASAP while first-year-adoption refreshments are still available.