IFRS S2 Adoption in African Financial Institutions

Africa ESG & Sustainability Advisory LTD — Intelligence Insights

IFRS S2^[1] Climate-related Disclosures became effective for annual reporting periods beginning on or after 1 January 2025. This intelligence brief examines the state of adoption across monitored financial institutions in Nigeria, Kenya, and South Africa — the three largest African capital markets — and finds that structural and governance disclosure is gaining traction while substantive climate scenario analysis and physical risk quantification remain in early stages across virtually all monitored institutions.

Key Findings

IFRS S2 governance disclosure (pillar one) is the most advanced element across all three markets, driven largely by pre-existing TCFD alignment efforts among larger institutions.
Scope 3 emissions disclosure remains at near-zero substantive levels across all monitored African financial institutions — the most significant gap relative to IFRS S2 requirements.
Climate scenario analysis — a core IFRS S2 requirement — is absent or purely qualitative in 89% of monitored institutions, with no institution in the Nigerian or Kenyan cohorts producing quantitative scenario analysis.
South African institutions demonstrate the strongest IFRS S2 preparedness overall, benefiting from earlier FSCA guidance, JSE listing requirement alignment, and Lloyd's/international reinsurer engagement.
The most common disclosure gap pattern is "structural alignment without substance" — institutions that have adopted IFRS S2 as a framework reference without building the internal data systems and analytical capability to produce substantive disclosures.

1. IFRS S2 Requirements in Brief

IFRS S2, published by the International Sustainability Standards Board (ISSB) in June 2023^[1], requires entities to disclose information about climate-related risks and opportunities across four pillars, aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework:

Governance: The governance processes, controls, and procedures for monitoring, managing, and overseeing climate-related risks and opportunities.
Strategy: The climate-related risks and opportunities that could affect the entity's business model, strategy, and cash flows over the short, medium, and long term — including scenario analysis.
Risk Management: The processes used to identify, assess, prioritise, and monitor climate-related risks and opportunities.
Metrics and Targets: The metrics and targets used to measure and monitor climate-related risks and opportunities, including Scope 1, 2, and 3 greenhouse gas emissions.

For financial institutions, IFRS S2 also requires disclosure of financed emissions — the climate impact of a bank's or insurer's portfolio and underwriting activities — which represents the most analytically demanding element of the standard for institutions in emerging markets.

2. Country-Level Adoption Assessment

2.1 Nigeria

Nigeria does not yet have a mandatory IFRS S2 adoption timeline established by the Financial Reporting Council of Nigeria (FRCN), though alignment is expected. The CBN's Climate Risk Management Framework (2023)^[5] provides partial alignment with the IFRS S2 risk management and metrics pillars for banking institutions. However, there is no equivalent insurance sector climate disclosure requirement from NAICOM at this stage.

Monitored Nigerian banking institutions — including the five Tier-1 commercial banks — show governance pillar disclosure that is improving, with board climate risk committees or formally mandated board-level climate risk oversight now documented in the majority of Tier-1 bank annual reports. Strategy and metrics disclosure quality is significantly weaker, with the most common gap being the absence of quantitative climate scenario analysis and meaningful Scope 3 or financed emissions data.

2.2 Kenya

Kenya's Capital Markets Authority (CMA) issued updated corporate governance guidelines in 2023^[4] that incorporate climate-related disclosure expectations aligned with IFRS S2. The Nairobi Securities Exchange (NSE) Sustainability Reporting Requirements align with GRI and TCFD. Kenya's banking sector shows moderate IFRS S2 governance alignment, with the Central Bank of Kenya (CBK) Climate Risk Guideline (2021) providing the primary regulatory driver.

Kenyan institutions are generally further ahead on stakeholder engagement and sustainability programme documentation than Nigerian peers, but similarly underprepared on quantitative climate scenario analysis and financed emissions.

2.3 South Africa

South Africa represents the most advanced African market for IFRS S2 adoption. The Financial Sector Conduct Authority (FSCA) published Guidance Note 7 of 2022^[3] on climate-related disclosure, aligning with TCFD. JSE Listing Requirements incorporate sustainability reporting. Several major South African financial institutions — particularly banks and long-term insurers — have been producing TCFD-aligned reports since 2020–2021.

IFRS S2 Pillar	Nigeria	Kenya	South Africa
Governance	Moderate	Moderate	Moderate-High
Strategy (qualitative)	Low-Moderate	Low-Moderate	Moderate
Strategy (scenario analysis)	Very Low	Low	Low-Moderate
Risk Management	Low-Moderate	Moderate	Moderate
Scope 1 & 2 Emissions	Low-Moderate	Moderate	Moderate-High
Scope 3 Emissions	Very Low	Very Low	Low-Moderate
Financed Emissions	Absent	Very Low	Low-Moderate
Climate Targets	Very Low	Low	Moderate

3. Critical Gaps

3.1 Scenario Analysis

IFRS S2 requires entities to use climate scenario analysis to assess the resilience of their strategy and business model to climate-related risks. For financial institutions, this includes assessing the impact of different temperature pathways (e.g., 1.5°C, 2°C, 3°C+ scenarios) on loan books, investment portfolios, and underwriting exposures. Across all three African markets, this requirement represents the most significant capability gap. Very few African financial institutions have the internal quantitative modelling capability, scenario data infrastructure, or climate risk analytical teams to produce genuinely substantive scenario analysis.

Critical gap: The NGFS (Network for Greening the Financial System (NGFS)^[7]) climate scenario models — which underpin most major IFRS S2 scenario analyses globally — were calibrated primarily on developed market economic structures. Their direct application to African financial sector portfolios requires significant localisation that most African institutions have not yet undertaken.

3.2 Financed Emissions

For banks and insurers, financed emissions (the GHG emissions attributable to the entity's lending, investment, and underwriting activities) represent the most material climate exposure in most cases. Yet this is the area with the lowest disclosure quality across all three markets. The primary barriers are data availability at the counterparty level, methodological uncertainty (particularly for African SME borrowers with no emissions data), and the limited adoption of the Partnership for Carbon Accounting Financials (PCAF) standard^[8] in African markets.

References

International Sustainability Standards Board (ISSB). (2023). IFRS S2 Climate-related Disclosures. London: IFRS Foundation.
International Sustainability Standards Board (ISSB). (2023). IFRS S1^[2] General Requirements for Disclosure of Sustainability-related Financial Information. London: IFRS Foundation.
Financial Sector Conduct Authority (FSCA), South Africa. (2022). Guidance Note 7 of 2022: Climate-related Financial Disclosures. Pretoria: FSCA.
Capital Markets Authority, Kenya. (2023). Code of Corporate Governance Practices for Issuers of Securities to the Public, 2023. Nairobi: CMA Kenya.
Central Bank of Nigeria (CBN). (2023). Climate Risk Management Framework for Nigerian Financial Institutions. Abuja: CBN.
Task Force on Climate-related Financial Disclosures (TCFD). (2023). 2023 Status Report. Basel: Financial Stability Board.
Network for Greening the Financial System (NGFS). (2023). NGFS Climate Scenarios for Central Banks and Supervisors. Paris: NGFS Secretariat.
Partnership for Carbon Accounting Financials (PCAF). (2022). The Global GHG Accounting and Reporting Standard for the Financial Industry, Second Edition. PCAF.
African Development Bank (AfDB). (2024). Tracking African Financial Sector Climate Disclosure Progress. Abidjan: AfDB.
Africa ESG & Sustainability Advisory (AESA). (2026). MIL-150^[10] Climate Indicator Technical Notes — Financial Sector. Abuja: AESA.

About AESA

Africa ESG & Sustainability Advisory LTD (AESA) is an ESG intelligence infrastructure company providing diagnostics, evidence governance, ratings, transformation intelligence, advisory, and knowledge programmes built for African markets. The AESA Intelligence Platform is built on the Master Indicator List (MIL-150). AESA Insights publications are drawn from the platform's live monitoring system and released under the AESA Intelligence Governance Protocol.

This publication is produced by Africa ESG & Sustainability Advisory LTD for intelligence and educational purposes. It reflects observations drawn from the AESA monitoring system as at the publication date. It does not constitute investment advice, legal advice, or regulatory guidance. © 2026 Africa ESG & Sustainability Advisory LTD. All rights reserved.