IFRS S2 Guide: Climate Disclosures in Kenya

Q: What is the main objective of IFRS S2?

IFRS S2 aims to provide users of financial statements with transparent, consistent, and comparable information on an entity’s exposure to climate-related risks and opportunities – and how these impact its financial position and performance.

Q: How does IFRS S2 relate to IFRS S1?

IFRS S2 must be applied together with IFRS S1. While IFRS S1 provides the overarching sustainability disclosure framework, IFRS S2 focuses specifically on climate-related risks and opportunities. It builds on IFRS S1 by setting out more detailed climate-specific disclosure requirements.

Q: Who is required to comply with IFRS S2?

IFRS S2 applies to entities preparing general-purpose financial reports under ISSB Standards. This includes both public and private companies – especially those seeking international investment or operating in jurisdictions adopting IFRS S1 and S2.

Q: What type of disclosures are required under IFRS S2?

Entities must disclose information aligned with the TCFD framework, including governance, strategy, risk management, and metrics and targets. Key metrics include Scope 1, 2, and 3 greenhouse gas (GHG) emissions.

Q: Is IFRS S2 adoption mandatory in Kenya?

Not yet. While IFRS S2 is currently not mandatory in Kenya, the country is actively engaging in global sustainability reporting efforts and is considering a phased approach to adoption. Companies with international operations or ESG-driven stakeholders are advised to begin aligning early.

IFRS S2 - A PRACTICAL GUIDE TO CLIMATE RELATED DISCLOSURES AND ADOPTION IN KENYA

IFRS Guide>>

June 5, 2025

Overview

IFRS S2 is part of the IFRS Sustainability Disclosure Standards developed by the International Sustainability Standards Board (ISSB).

It is used in conjunction with IFRS S1 and mandates companies to disclose relevant climate-related financial information.

In this article, we break down the key aspects of IFRS S2 – the climate-related disclosure standard issued by the ISSB.

We explain what IFRS S2 is, how it relates to IFRS S1, the compliance obligations it introduces, and Kenya’s progress toward adopting the standard.

Introduction

The Task Force on Climate-related Financial Disclosures (TCFD) recommended standardized, industry-specific climate disclosure practices, incorporating SASB standards.

In response, the ISSB published the Exposure Draft of IFRS S2 in March 2022.

The final standard was issued in June 2023 to enhance the transparency, consistency, and comparability of climate-related financial reporting.

What is IFRS S2 ?

IFRS S2 is a Sustainability Disclosure Standard developed by the ISSB focused on Climate-related Disclosures that requires an entity to disclose information pertaining to its climate-related risks and opportunities.

This information helps investors and stakeholders make informed, long-term financial decisions.

While not an accounting standard, IFRS S2 is essential for sustainability-related financial disclosures.

Relation to IFRS S1

IFRS S2 must be applied with IFRS S1, which provides the general framework for sustainability disclosures.

IFRS S1 establishes a global structure to integrate environmental, social, and governance (ESG) information with financial reporting.

Effective Date

IFRS S2 – Climate Related Disclosures became effective from January 1st , 2024 with an early adoption permitted.

This was after the International Sustainability Standards Board (ISSB) issued it on June 26, 2023.

Who Needs to Comply?

Publicly listed companies regulated to report sustainability-related data
Entities applying IFRS S1
Companies with material climate-related financial risks or opportunities

Note: IFRS S2 adoption is currently voluntary unless mandated by a local jurisdiction

Kenya’s Roadmap to IFRS S2 Adoption

Kenya is progressing toward the adoption of IFRS S2.

The Institute of Certified Public Accountants of Kenya (ICPAK) has outlined a phased implementation

The adoption roadmap of these standards is as follows:

Effective Date	Entities Affected
Jan 1, 2027	Mandatory Adoption for Public Interest Entities (PIEs)
Jan 1, 2028	Mandatory adoption for Large Enterprises
Jan 1, 2029	Mandatory adoption for Small and Medium-sized enterprises (SMEs)

Additionally, the Central Bank of Kenya (CBK) has been proactive in this area, issuing a draft Climate Risk Disclosure Framework in September 2024 to guide commercial banks in disclosing climate-related information.

Scope of IFRS S2?

IFRS S2 applies to:

1. Climate-related risks to which the entity is exposed which include:

Climate-related physical risks
Climate-related Transition risks

2. Climate-related opportunities available to the entity

Disclosure Requirements under IFRS S2

As mentioned earlier, IFRS S2 mandates the disclosure of an entity’s climate risks and opportunities.

This financial information enables users of general purpose financial reports to understand:

a) The Governance process:

IFRS S2 Mandates that entities disclose the governance processes, controls, and procedures used to monitor, assess, and manage climate-related risks and opportunities.

b) The Entity’s Strategy

Entities must describe the impact of climate-related risks and opportunities on their strategy and business model. This includes:

Current and anticipated effects on the business model and value chain
Where climate risks and opportunities are concentrated
How the organization is responding or plans to respond to these factors
How the strategy has been adjusted and resourced
Progress on implementation of strategies and previously disclosed plans

c) Risk Management

Entities must explain their processes for identifying, assessing, and prioritizing climate-related risks and opportunities.

Additionally, IFRS S2 requires entities to describe:

The process of integrating climate risk management into overall enterprise risk management systems
Monitoring mechanisms

d) The Business Model and Value Chain

An entity must disclose the current and future anticipated effects of climate related risks and opportunities on the entity’s business model and value chain that contains:

A description of the current and anticipated effects of climate-related risks and opportunities on the entity’s business model and value chain.
A description of where in the entity’s business model and value chain climate-related risks and opportunities are concentrated.

e) Strategy and Decision-making

Entities must disclose the effects of the climate -related risks and opportunities on its strategy and decision-making which means disclosure of:

A detailed description of how the entity has responded to , plans to respond to climate related risks and opportunities in its strategy as well as a plan of how it aims to achieve its climate-related targets.
Information relating to how an entity resources and plans to resource the plans and strategies identified to deal with climate-related risks and opportunities.
Quantitative and qualitative information about the progress of plans, identities and disclosed in previous reporting periods.

f) Financial Position, Financial Performance and Cashflows

Entities must provide information on how climate-related risks and opportunities affect their financial position, performance, and cash flows in the short, medium, and long term.

This includes:

Impact on investment and funding decisions
Effects on asset values, revenues, and costs
Disclosure of qualitative data where quantitative data is unavailable, with explanation

g) Climate Resilience

Entities must provide information that enables users to understand the resilience of their strategy and business model to climate-related risks and opportunities. This must include:

Use of climate scenario analysis
How the organization would adapt or respond under different climate scenarios

h) Metrics and Targets

Entities must disclose the performance metrics and targets they use to assess and manage climate-related risks and opportunities. This includes:

Quantitative and qualitative metrics
Timeframes, baselines, milestones, and tracking mechanisms
Whether metrics align with national or global standards

Disclosure of Climate-Related Targets

According to IFRS S2, Entities must disclose climate-related targets they’ve set or are required to meet, including for GHG emissions.

For each target, they should report:

What the target is (e.g. emissions reduction, adaptation)
Metrics used, scope of coverage, timeframes, and milestones
How targets align with global climate agreements (e.g. Paris Agreement)
How progress is tracked, reviewed, and validated
Performance against targets, including trends or changes

For GHG targets, entities must also specify:

Gases and scopes covered (Scope 1, 2, 3)
Gross vs. net targets and use of carbon credits (including type, verification, and credibility)

FAQS

1. What is the main objective of IFRS S2?

IFRS S2 aims to provide users of financial statements with transparent, consistent, and comparable information on an entity’s exposure to climate-related risks and opportunities – and how these impact its financial position and performance.

2. How does IFRS S2 relate to IFRS S1?

IFRS S2 must be applied together with IFRS S1.
While IFRS S1 provides the overarching sustainability disclosure framework, IFRS S2 focuses specifically on climate-related risks and opportunities.
It builds on IFRS S1 by setting out more detailed climate-specific disclosure requirements.

3. Who is required to comply with IFRS S2?

IFRS S2 applies to entities preparing general-purpose financial reports under ISSB Standards.
This includes both public and private companies – especially those seeking international investment or operating in jurisdictions adopting IFRS S1 and S2.

4. What type of disclosures are required under IFRS S2?

Entities must disclose information aligned with the TCFD framework, including governance, strategy, risk management, and metrics and targets.
Key metrics include Scope 1, 2, and 3 greenhouse gas (GHG) emissions.

5. Is IFRS S2 adoption mandatory in Kenya?

Not yet.
While IFRS S2 is currently not mandatory in Kenya, the country is actively engaging in global sustainability reporting efforts and is considering a phased approach to adoption.

Companies with international operations or ESG-driven stakeholders are advised to begin aligning early.

Conclusion

As the world shifts toward a low-carbon economy, IFRS S2 plays a pivotal role in equipping organizations with a consistent framework for climate-related disclosures.

Companies adopting IFRS S2 not only position themselves for compliance but also gain strategic insight, stakeholder confidence, and long-term resilience.

Need support implementing IFRS S2?

Mugo & Co. offers expert guidance on sustainability disclosures, ESG reporting, and IFRS S2 readiness.

Whether you’re just starting or refining your reporting frameworks, our team is here to help you navigate compliance with confidence.

Disclaimer

This article is intended for general informational purposes only and does not constitute professional advice on the implementation of IFRS S2.

For tailored guidance specific to your organization’s circumstances, please consult your accounting advisor or contact Mugo & Co. to book a professional consultation.

Sources