IFRS S2 · Scope 3 and financed emissions
IFRS S2 Scope 3: the whole value chain, and what financial institutions add
IFRS S2 requires gross Scope 3 emissions, measured across the whole value chain, with every one of the GHG Protocol’s 15 categories considered.
Asset managers, banks and insurers disclose their financed emissions in more detail, and the standard tells every entity how to prioritise the data it uses.
The requirement
What IFRS S2 asks for on Scope 3
Paragraph 29(a) requires absolute gross Scope 3 greenhouse gas emissions for the reporting period, in metric tonnes of CO2 equivalent.
The entity “shall consider its entire value chain (upstream and downstream) and shall consider all 15 categories” of the GHG Protocol Scope 3 Standard, and disclose which categories its measure includes (B32).
It discloses the categories whatever measurement method it uses, including where a jurisdiction requires a method other than the GHG Protocol (B33).
On a significant event or change — a supplier change, an acquisition, a new emissions rule in the value chain — it reassesses which categories and value-chain entities to include (B34, applying IFRS S1 ¶B11).
The standard presumes Scope 3 can be estimated reliably from secondary data and industry averages; only in rare cases, where estimation is impracticable, does the entity instead disclose how it manages Scope 3 (B57).
The measurement framework
Four characteristics to prioritise data by
IFRS S2 does not specify which inputs to use, but requires the entity to prioritise inputs and assumptions using four characteristics, listed in no particular order (B40).
The framework applies even when a jurisdiction requires a method other than the GHG Protocol, and even under the first-year measurement-method relief (B41).
Weighing the characteristics is a judgement: more recent data may be less specific, and older data may be more representative (B42).
The entity then discloses how far its Scope 3 figure rests on inputs from specific activities in its value chain and on verified inputs, so investors can judge its quality (B56).
- 1
Direct measurement
All else equal, prioritise direct monitoring over estimation (B43).
- 2
Specific-activity data
Prioritise primary data from the value chain — supplier data, meter readings — over secondary data (B47).
- 3
Timely, representative data
Where secondary data is used, prioritise data that matches the technology, the jurisdiction and the period (B50–B52).
- 4
Verified data
Prioritise data that has been internally or externally verified (B53).
Financed emissions
Asset managers, banks and insurers: the extra disclosure
An entity in any of the three activities discloses additional information about its financed emissions as part of Scope 3 (B58–B63A).
| Activity | What it discloses | Paragraphs |
|---|---|---|
| Asset management | Gross financed emissions by Scope 1, 2 and 3; the assets under management covered, in the presentation currency; the percentage of total AUM included, with exclusions explained; the methodology and allocation method | B61 |
| Commercial banking | Gross financed emissions by scope for each industry by asset class; gross exposure by industry and asset class, with undrawn commitments separately; the percentage of exposure included; the methodology | B62–B62A |
| Insurance | The same structure as banking for investment activities, by industry and asset class; underwriting portfolios’ associated emissions are not required | B63–B63A |
Since the December 2025 amendments, banks and insurers choose an industry-classification system that shows their exposure to transition risk, prioritising a commonly used system, and disclose which they used and why (B62A, B63A).
An entity may limit Category 15 to financed emissions and exclude derivatives, explaining both (¶¶29A–29B), and an entity that includes Category 15 discloses its total and the financed subtotal (¶29C).
IFRS S2 does not name a calculation method; many institutions use the PCAF Standard, which the standard neither requires nor excludes.
The four amendments are explained on the IFRS S2 amendments.
Reliefs
The first-year relief, three ways
Under IFRS S2, an entity need not disclose Scope 3, including financed emissions, in its first annual reporting period (¶C4(b)), and may keep that omission when the year is later shown as a comparative (¶C5).
UK SRS S2 carries the same relief with no time limit and leaves its length to legislation or regulation.
The FCA has set it at one year for listed companies; a company using it says so, and that statement does not engage the explain rules (PS26/19 ¶3.20).
From periods beginning in 2028, Scope 3 is comply or explain for a listed company that started in 2027.
| Text | Scope 3 relief |
|---|---|
| IFRS S2 ¶C4(b) | First annual reporting period only, financed emissions included |
| UK SRS S2 ¶C4 | No time limit in the standard; length set by regulation |
| FCA rules (PS26/19) | One year from initial application, then comply or explain |
In the UK
The one place UK SRS asks for more
UK SRS S2 adds ¶B59A: where an entity determines it is impracticable to reliably estimate financed emissions for the same period as its financial statements, it must explain why (Annex A).
It is the only provision in which UK SRS is stricter than IFRS S2; every other UK change is permissive.
The UK reading of Scope 3, with the 15 categories described one by one, is on UK SRS Scope 3 reporting.
Frequently asked
Scope 3 under IFRS S2, answered
Does IFRS S2 require Scope 3 emissions?
Yes.
Paragraph 29(a) requires absolute gross Scope 3 greenhouse gas emissions in metric tonnes of CO2 equivalent, and the categories included in the measure.
The only relief is in the first annual reporting period, when an entity need not disclose Scope 3 (¶C4(b)).
Must all 15 Scope 3 categories be reported under IFRS S2?
All 15 must be considered: the entity considers its entire value chain, upstream and downstream, and all 15 categories of the GHG Protocol Scope 3 Standard, then discloses which categories its measure includes (B32).
Which categories are included follows from what is material and reasonably estimable; the standard presumes Scope 3 can be estimated using secondary data and industry averages.
How should Scope 3 be measured under IFRS S2?
Using all reasonable and supportable information available without undue cost or effort, prioritised by four characteristics: direct measurement, data from specific activities in the value chain, timely data representing the technology and jurisdiction, and verified data (B40).
The entity discloses how far its Scope 3 figure uses specific-activity inputs and verified inputs.
What are financed emissions under IFRS S2?
The portion of an investee’s or counterparty’s gross emissions attributed to the loans and investments an entity makes, part of Scope 3 Category 15.
Entities in asset management, commercial banking or insurance disclose them in more detail: gross financed emissions by scope, the exposure or assets covered, the percentage included, and the methodology.
Can a bank leave out facilitated emissions under IFRS S2?
Under the December 2025 amendments an entity may limit Category 15 to financed emissions (¶29A), which leaves out facilitated emissions from investment banking and insurance-associated emissions, provided it explains what it treated as derivatives and which activities it excluded (¶29B).
How long is the Scope 3 relief in the UK?
UK SRS S2 ¶C4 removes the time limit, leaving it to regulators.
Under the FCA’s rules a listed company may omit Scope 3 for one year from initial application, stating that it does so; after that, Scope 3 is comply or explain.
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner.
Secondary commentary is never the source for a number.
- IFRS FoundationIFRS S2, full text (December 2025)
¶29(a)(vi), ¶¶29A–29C, B32–B63A, C4(b) and C5.
- IFRS FoundationIFRS S1, full text
¶B11: reassessing the value chain on a significant event or change in circumstances.
- IFRS FoundationISSB issues targeted amendments to IFRS S2 (11 December 2025)
Category 15 limitation and classification systems beyond GICS.
- GHG ProtocolCorporate Value Chain (Scope 3) Standard (2011)
The 15 Scope 3 categories IFRS S2 refers to.
- GHG ProtocolTechnical Guidance for Calculating Scope 3 Emissions
Calculation methods by category; guidance, not an IFRS requirement.
- GHG ProtocolCorporate Accounting and Reporting Standard (2004)
The base measurement standard in ¶29(a)(ii).
- PCAFGlobal GHG Accounting and Reporting Standard, Part A (2025)
A widely used financed-emissions method; IFRS S2 does not mandate a method.
- Department for Business and TradeUK SRS S2 (PDF)
¶C4 Scope 3 relief with no time limit; ¶B59A explanation where financed emissions cannot be estimated.
- Department for Business and TradeConsultation response (PDF), Annex A
The B59A row, the one UK provision stricter than IFRS.
- Financial Conduct AuthorityPS26/19 (PDF), ¶¶3.14, 3.20 and 3.23
Scope 3 relief for one year from initial application, then comply or explain.
Continue reading
Read next
IFRS S2 amendments
The December 2025 changes to Category 15 and financed emissions.
IFRS S2 cross-industry metrics
Greenhouse gases and the six other categories.
UK SRS Scope 3 reporting
Scope 3 under the UK standard and the FCA’s rules.
Scope 3 emissions
The 15 categories and how to calculate them.
IFRS S2
The climate standard, paragraph by paragraph.
IFRS Sustainability Disclosure Standards
The whole ISSB family.