IFRS S1 and IFRS S2 change ESG reporting in Malaysia by replacing flexible, company-defined sustainability disclosure with a structured, investor-focused standard that links sustainability information to financial reporting. Under the National Sustainability Reporting Framework (NSRF), these two ISSB standards are now the baseline for Bursa-listed companies and large non-listed companies.
For many Malaysian reporters, the shift is bigger than a change of template. Earlier Sustainability Statements gave companies considerable room to pick their own topics and formats. The new standards ask for consistent structure, quantified climate data and a clear line back to financial performance.
This article walks through what changes in practice, how the phase-in works, and where stakeholders see opportunities and risks.
What Are IFRS S1 and IFRS S2?
IFRS S1 is the general standard for sustainability-related financial disclosures, and IFRS S2 is the climate-specific standard. Both are issued by the International Sustainability Standards Board and both are named in the NSRF as the baseline for sustainability reporting in Malaysia.
The NSRF was published on 24 September 2024 by the Advisory Committee on Sustainability Reporting (ACSR), an inter-agency committee chaired by the Securities Commission Malaysia. It was designed to give investors consistent, comparable and reliable information, and to bring Malaysia in line with the 20-plus jurisdictions that have decided to adopt or move toward the ISSB standards.
What Does IFRS S1 Require?
IFRS S1 requires companies to disclose material information about sustainability-related risks and opportunities that could reasonably affect their prospects, including cash flows, access to finance and cost of capital. It organises that information into four areas: governance, strategy, risk management, and metrics and targets. It also expects the information to be published alongside the financial statements, for the same reporting entity and period.
What Does IFRS S2 Add for Climate?
IFRS S2 adds specific climate requirements on top of the S1 structure. Companies must disclose climate-related risks and opportunities, the effect on strategy and business model, climate resilience through scenario analysis, and greenhouse gas emissions across Scope 1, Scope 2 and Scope 3. It also touches on topics such as transition plans, targets and the link between climate performance and executive remuneration.
How Do IFRS S1 and S2 Change ESG Reporting Compared with Earlier Practice?
The standards change ESG reporting by moving it from a flexible, narrative-led exercise to a standardised, decision-useful disclosure that sits close to the financial statements. Where companies once chose their own frameworks and topics, they now follow a common structure.
Malaysia's earlier regime centred on Bursa Malaysia's Sustainability Statement, strengthened by enhanced requirements introduced in 2022 and supported by a Sustainability Reporting Guide. Bursa amended its Main Market and ACE Market Listing Requirements in December 2024 to align the Sustainability Statement with the NSRF, so the new standards are now part of the listing rulebook.
Does ESG Reporting Become More Financial?
Yes. IFRS S1 and S2 are built around financial materiality, so information is included when it could influence investor and lender decisions. That pushes ESG reporting closer to risk management and strategy, and it encourages finance teams and sustainability teams to work from shared assumptions.
Does ESG Reporting Become More Comparable?
Yes. A common structure and common metrics allow investors to compare Malaysian companies with each other and with peers abroad. Comparability is the central promise of the framework, and it explains why regulators chose a global standard instead of a domestic one.
Does ESG Reporting Become More Quantified?
Yes, especially on climate. Emissions data, targets and scenario analysis require numbers and methods that can be repeated. IFRS S2 expects greenhouse gas emissions to be measured under the GHG Protocol unless a jurisdiction requires another method, which narrows the room for custom approaches.
Who Must Apply IFRS S1 and S2 in Malaysia, and When?
The standards apply to Bursa Malaysia Main Market and ACE Market issuers and to non-listed companies with consolidated revenue of RM2 billion or more for two consecutive years. Adoption is phased across three groups.
What Are the Three Groups and Start Dates?
Group 1 covers Main Market issuers with a market capitalisation of RM2 billion or above, about 130 companies representing more than 80% of Bursa's market value, starting for financial years from 1 January 2025. Group 2 covers the remaining Main Market issuers from 1 January 2026. Group 3 covers ACE Market issuers and large non-listed companies from 1 January 2027.
What Transition Reliefs Apply?
Group 1 and Group 2 companies may limit their first two reporting periods to climate-related risks and opportunities under IFRS S2, with a focus on principal business segments. They may also postpone Scope 3 emissions except for categories a regulator already requires. Bursa Main Market issuers, for instance, already report Scope 3 emissions from business travel and employee commuting. Group 3 companies receive additional time. Full IFRS S1 coverage, reaching topics such as workforce and supply chain risk, follows afterwards.
How Do Banks and Insurers Fit In?
Bank Negara Malaysia clarified in March 2025 how the NSRF applies to the institutions it regulates. The Joint Committee on Climate Change, co-chaired by Bank Negara and the Securities Commission, issued NSRF guidance documents for banks and for insurers and takaful operators after its meeting in August 2026, with capacity-building programmes scheduled from October 2026.
How Do IFRS S1 and S2 Change Governance, Strategy and Risk Disclosure?
They change these areas by requiring companies to explain who oversees sustainability matters, how those matters shape strategy, and how risks are identified and managed. These are narrative disclosures, but they are expected to be specific and consistent with the numbers.
What Changes in Governance Disclosure?
Companies must describe the board and management roles responsible for oversight of sustainability-related and climate-related risks, including the sBlockedword/sentences and processes involved. A generic statement that the board "supports sustainability" no longer meets the expectation. Reporters need to show how oversight works in practice.
What Changes in Strategy and Risk Disclosure?
Companies must explain how risks and opportunities affect the business model, the value chain, financial position and performance, and how they are integrated into overall risk management. For climate, scenario analysis helps show how resilient the strategy is under different conditions. This is a notable step up for companies that previously reported mainly on programmes and activities.
How Do IFRS S1 and S2 Change Metrics, Targets and Assurance?
They raise the bar on measurement and set the stage for independent verification. Metrics and targets must be defined, consistently measured and linked to the company's strategy, and the NSRF plans mandatory assurance on selected emissions data.
What Changes for Emissions Metrics?
Companies must report Scope 1 and Scope 2 emissions, and Scope 3 once reliefs end, using documented methods. Reproducibility matters: another party should be able to follow the inputs and reach the same figure. This pushes companies to formalise data collection, ownership and review.
What Is the Status of Assurance?
In September 2026 the ACSR deferred mandatory reasonable assurance of Scope 1 and Scope 2 emissions for Group 1 entities to annual periods beginning on or after 1 January 2028, after a review of the first reporting cohort found that disclosure quality needed improvement. Independent assurance must follow ISSA 5000, and a Sustainability Assurance Guide is planned. Until the mandate starts, listed issuers must state whether their disclosures were internally reviewed or independently assured.
What Are the Different Views on How IFRS S1 and S2 Change ESG Reporting?
Views vary, but most stakeholders accept the direction. The debate is about pace, cost and scope.
What Do Investors and Regulators Say?
Investors and regulators say that consistent, comparable information lowers the cost of analysing companies and supports capital flows. They view the phased timeline and built-in reliefs as a realistic route to higher quality ESG reporting, and the 2026 assurance deferral as a sign that regulators want quality before speed.
What Do Companies Say?
Companies cite the effort of building new data systems, the scarcity of trained staff and the difficulty of collecting supplier data for Scope 3. Later-phase companies, in particular, are looking for practical guidance and shared tools. Many welcome one global standard, since it replaces overlapping requests from different customers and investors.
What Do Critics Say?
Some observers note that a financially focused standard may leave out impacts on people and nature that are important but not yet visible in company accounts. They suggest broader frameworks such as GRI remain valuable alongside the NSRF. Others point to the assurance deferral as evidence of a gap between the framework's ambition and corporate readiness, and stress that assurance only reaches what falls inside its scope.
How Can Companies Prepare for IFRS S1 and S2?
Companies can prepare by confirming their group, closing gaps against IFRS S2 first, and building controlled data processes. A staged approach avoids a last-minute scramble.
What Are Practical First Steps?
Practical steps include mapping current disclosures to the standards, assigning owners for each metric, documenting emissions methods, testing internal controls, and aligning finance and sustainability calendars so reports are ready together. Companies can also use national capacity-building resources, including those from the Securities Commission, as they become available.
FAQ: Common Questions About IFRS S1, IFRS S2 and ESG Reporting in Malaysia
Do IFRS S1 and S2 Replace the Bursa Sustainability Statement?
They reshape it. Bursa's December 2024 listing-rule amendments align the Sustainability Statement with the NSRF, so the IFRS-based requirements now drive its content.
Which Standard Covers Climate?
IFRS S2 covers climate-related disclosures. IFRS S1 covers general sustainability-related financial disclosures.
When Do Companies Have to Start?
Group 1 started for financial years from 1 January 2025, Group 2 starts on 1 January 2026, and Group 3 starts on 1 January 2027.
Can Companies Report Only Climate at First?
Group 1 and Group 2 companies can focus on climate-related disclosures for their first two reporting periods under the NSRF reliefs.
Is Scope 3 Reporting Required Right Away?
Not in most cases. Scope 3 can be postponed, except for categories already required by a regulator.
When Does Mandatory Assurance Start?
Mandatory reasonable assurance of Scope 1 and Scope 2 emissions for Group 1 entities now applies to annual periods beginning on or after 1 January 2028.
Conclusion
ESG reporting in Malaysia is becoming more structured, more comparable and more closely tied to financial reporting. IFRS S1 and S2 set the content, Bursa's listing rules enforce it, and assurance will test it.
The transition is gradual by design, and the 2028 assurance date gives companies extra time. Those who use it to strengthen data, governance and controls will find that the change is less a burden than a framework for making sustainability information as dependable as the rest of the annual report.