TCFD vs ISSB: What Changes When You Move from TCFD to IFRS S1 & S2

If your organisation already reports against TCFD, you have a significant head start for ISSB compliance. The International Sustainability Standards Board (ISSB) designed IFRS S1 and S2 to incorporate and eventually supersede TCFD.

But there are meaningful differences. This article explains the key gaps and what you actually need to do differently.

Background: The Relationship Between TCFD and ISSB

TCFD published its framework in 2017 under the Financial Stability Board. Over the past eight years, it became the dominant climate-disclosure framework for listed companies globally — required by regulators in the UK, Hong Kong, Switzerland, New Zealand, and referenced in ESRS E1 (EU) and SEC Climate Rule (US).

In 2023, ISSB published IFRS S1 (general sustainability disclosures) and IFRS S2 (climate disclosures). IFRS S2 explicitly incorporates TCFD's four-pillar structure, meaning all TCFD disclosures satisfy equivalent IFRS S2 requirements. The TCFD Secretariat subsequently disbanded, with ISSB taking over monitoring of climate-related disclosures.

Despite this, ISSB is not simply "TCFD with a new name." Several additions and changes require attention.

The Four Pillars: Same Structure, Different Requirements

Both frameworks organise disclosures around four pillars:

Pillar TCFD Focus IFRS S2 Additions
Governance Board oversight of climate risk Same, plus explicit linkage to remuneration
Strategy Climate risks/opps + scenario analysis Industry-specific risk sets; climate resilience disclosure required
Risk Management Integration with ERM Same; clearer requirement to quantify financial effects
Metrics & Targets GHG Scope 1, 2, 3 Industry-based metrics from SASB (mandatory)

Key Difference 1: Financial Materiality as the Anchor

TCFD applies a voluntary framing — companies disclose what is "relevant" to investors. ISSB formalises this as investor-focused, single materiality: information is material if omitting, misstating, or obscuring it could reasonably be expected to influence investor decisions.

This is a stricter standard than "relevant to investors" and aligns ISSB with IASB's existing materiality definition in IAS 1. Practically, this means:

  • You need to quantify or estimate the financial effects of climate risks and opportunities where possible
  • You cannot omit disclosures on immaterial grounds without documenting why
  • Forward-looking scenarios used in strategy disclosures need to be consistent with assumptions used in your financial statements

Key Difference 2: Industry-Based Metrics Are Mandatory

TCFD recommends climate metrics but leaves the choice to companies. IFRS S2 requires disclosure of industry-based metrics using the ISSB's Industry-based Guidance (derived from SASB Standards).

This means your climate disclosure must now include sector-specific quantitative metrics. For example:

  • Energy sector: Proved reserves, methane intensity, flaring
  • Financial services: Financed emissions, climate-related credit exposure
  • Real estate: Energy intensity per floor area, energy efficiency rating distribution
  • Agriculture: Land use change, water intensity

If you have been disclosing only company-wide GHG metrics under TCFD, you have a gap to close.

Key Difference 3: Connectivity with Financial Statements

IFRS S1 §29–31 introduces a requirement that does not exist in TCFD: connectivity between sustainability information and financial reporting.

Companies must explain how sustainability-related risks and opportunities are reflected in:

  • The financial statements themselves (assumptions, estimates, useful lives)
  • The company's financial position, performance, and cash flows
  • Its business model and strategy

This requires collaboration between the sustainability team and the finance/accounting function that TCFD disclosure rarely demanded. CFOs and controllers need to engage with climate scenario assumptions — not just sustainability managers.

Key Difference 4: Scope and Coverage of IFRS S1

TCFD covers only climate. IFRS S1 covers all sustainability-related financial disclosures — not just climate. This includes:

  • Biodiversity and natural capital risks
  • Water scarcity affecting operations
  • Human capital risks (talent, health and safety)
  • Social supply chain risks
  • Governance and conduct risks

For companies with material sustainability risks beyond climate — particularly in agriculture, mining, apparel, or financial services — IFRS S1 requires disclosures that TCFD never prompted.

Practical Transition Steps

If you are moving from TCFD to ISSB, here is a structured gap assessment:

  1. Governance: Already done if you have TCFD. Add remuneration linkage if not already disclosed.
  2. Strategy: Review whether financial effect quantification is sufficient. Add climate resilience statement.
  3. Risk Management: Document the integration of climate risk into enterprise risk management more explicitly.
  4. Metrics: Check your sector in the ISSB industry-based guidance. Add mandatory metrics. Ensure Scope 3 disclosure is complete.
  5. Financial connectivity: Work with finance to map climate assumptions to balance sheet line items and financial estimates.
  6. IFRS S1 non-climate risks: Conduct a gap analysis on material sustainability topics beyond climate.

Countries Adopting ISSB

As at mid-2025, ISSB standards have been adopted or are in the adoption process in:

  • Australia (mandatory from FY2025 for large companies)
  • Canada (in process, large companies 2025–2026)
  • Singapore (large listed companies FY2025)
  • Brazil (listed companies FY2025)
  • United Kingdom (UKSR expected to require ISSB)
  • Japan (SSBJ standards aligned with ISSB, FY2025 large companies)
  • Hong Kong (listed companies FY2025 for large issuers)

Summary

Companies with strong TCFD programmes have the hardest work already done. The key additions for ISSB are:

  1. Industry-specific SASB metrics
  2. Financial connectivity (sustainability-to-financials linkage)
  3. Expanded scope beyond climate (via IFRS S1)
  4. More rigorous financial materiality language

Emistra natively supports both TCFD and ISSB S1 & S2, with cross-mapping between the frameworks so data entered once satisfies both — and links to your GHG Protocol emissions inventory automatically. SASB industry-specific metrics are available as a dedicated separate module. Explore the platform →