The International Sustainability Standards Board on 12 December 2025 announced amendments to its flagship climate disclosure standard, IFRS S2, easing how banks, insurers and asset managers report financed emissions and offering regulatory relief as adoption accelerates across global markets, including Africa.
The changes narrow the scope of mandatory Scope 3 disclosures and clarify measurement rules, responding to implementation challenges raised by financial institutions since the standard came into force.
The decision comes as IFRS S2 moves from policy design into real-world use. Issued in June 2023 alongside IFRS S1, the climate standard was designed to create a consistent, investor-focused baseline for sustainability reporting. Since then, about 40 jurisdictions have taken formal steps toward adoption or alignment.
Several African countries, including South Africa, Nigeria and Kenya, have signaled intentions to converge local reporting frameworks with ISSB standards as part of broader capital market reforms.
As financial institutions began applying IFRS S2, Scope 3 category 15 emissions, those linked to financing activities, emerged as the most complex area. Banks and asset managers reported difficulties in attributing emissions across loans, investments, underwriting and capital markets transactions, particularly where data quality remains uneven.
African lenders faced additional constraints, with limited emissions data from borrowers in sectors such as agriculture, mining and informal enterprise, which account for a large share of economic activity across the continent.
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Under the amended guidance, financial institutions are now permitted to focus financed emissions disclosures on what they directly control or manage. Banks may limit reporting to emissions linked to loans and investments, while asset managers may concentrate on assets under management.
The ISSB has confirmed that facilitated emissions related to investment banking activities do not fall within the mandatory reporting boundary. Emissions linked to insurance underwriting and reinsurance are also excluded, as are those attributable to derivatives.
For African financial markets, where capital markets activities are growing but still less transparent than in developed economies, the clarification resolves uncertainty that had slowed early implementation. Several regional banks had flagged the challenge of applying global standards to syndicated loans, trade finance and cross-border investments where emissions ownership is difficult to define.
The ISSB also introduced flexibility on how financed emissions are classified and measured. Financial institutions with commercial banking or insurance operations are no longer required to use the Global Industry Classification Standard when breaking down emissions data.
Alternative classification systems may be used, allowing disclosures to better reflect internal risk management and portfolio structures. This is expected to benefit African banks that rely on sector classifications tailored to local economic conditions rather than global taxonomies.
Measurement rules have also been adjusted to reflect regulatory diversity. Firms may apply Global Warming Potential values set by national regulators even if they differ from the latest Intergovernmental Panel on Climate Change assessment.
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Where local rules mandate an emissions accounting approach other than the Greenhouse Gas Protocol, those methods may be used under IFRS S2. This flexibility is particularly relevant in Africa, where environmental reporting frameworks are still evolving and often embedded within broader financial regulation rather than standalone climate rules.
The ISSB has framed the amendments as technical refinements rather than a dilution of climate disclosure. Vice Chair Sue Lloyd said the changes were intended to address operational challenges while preserving investor-relevant information on climate risk.
The board’s position is that clearer boundaries will improve data quality by encouraging institutions to report emissions they can reasonably measure and influence.
For investors active in African markets, the revisions are likely to support comparability at a time when capital flows are increasingly tied to climate risk assessments.
According to the African Development Bank, climate-related financial disclosures are becoming a prerequisite for accessing international funding, particularly for banks financing energy, transport and industrial projects. IFRS S2 has been positioned as a common reference point for such disclosures, reducing fragmentation across jurisdictions.
The amendments arrive as African regulators balance climate ambition with market readiness. South Africa’s National Treasury has already indicated that ISSB-aligned reporting will underpin future sustainability disclosure requirements for listed companies and financial institutions. Nigeria’s Financial Reporting Council has taken similar steps, while Kenya’s Capital Markets Authority has begun consultations on climate risk disclosure for issuers and intermediaries.
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By easing reporting burdens without abandoning a global baseline, the ISSB is attempting to maintain momentum behind IFRS S2 at a sensitive stage. For African banks and asset managers, the changes reduce the immediate cost and complexity of compliance while keeping climate risk firmly within the scope of financial reporting.
For policymakers and investors, they reinforce the ISSB’s role in shaping how climate-related financial information is produced and compared as sustainability considerations continue to reshape capital markets across the continent.
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