The objective of climate-related financial disclosures on metrics and targets is to enable users of general-purpose financial reports to understand an entity’s performance in relation to its climate-related risks and opportunities, including progress towards any climate-related targets it has set, and any targets it is required to meet by law or regulation. (IFRS S2, Paragraph 27) 

What are climate-related metrics? 

Metrics are systems of measurement that help entities understand and evaluate their performance. In sustainability reporting, climate-related metrics reflect both an entity’s impact on the climate and its exposure to climate-related risks and opportunities.

Under IFRS S2, entities are expected to disclose two main types of metrics: 

What are climate-related targets? 

An entity shall disclose the quantitative and qualitative climate-related targets it has set to monitor progress towards achieving its strategic goals, and any targets it is required to meet by law or regulation, including any greenhouse gas emissions targets. (IFRS S2, Paragraph 33)  

If metrics tell entities where they are now, targets define where they want to be. Targets are specific results an entity aims to achieve within a defined timeframe. These can be either quantitative or qualitative in nature: 

Building on the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations, IFRS S2 requires entities with climate-related targets to disclose detailed information for each target: 

• Purpose: For example, reducing electricity consumption to lower costs and improve operational efficiency.
• Metrics used and alignment with global climate goals: Currently, the Paris Agreement.
• Boundary of application: Whether entity-wide or specific business units.
• Timeframe: Base year, target year and any interim milestones.
• Monitoring approach: Methods for tracking progress and update frequency.
• Review process: Third-party validation (e.g. Science Based Targets initiative (“SBTi”)), internal approvals and periodic reassessments. 

When reviewing progress, entities may find that targets are either more achievable than expected—prompting greater ambition—or require adjustment due to organisational changes or resource constraints. IFRS S2 allows revisions, provided entities remain transparent and clearly explain the rationale behind any updates. 

Setting SMART climate-related targets 

Entities may establish climate-related targets for various reasons; whether to meet regulatory expectations (such as alignment with Nationally Determined Contributions, or NDCs), to benchmark against industry peers, or to reflect an internal commitment to reducing their impact on the climate system.

Regardless of motivation, effective climate-related target setting begins with understanding how the entity can mitigate the effects of climate-related risks while leveraging emerging opportunities. The key challenge lies in striking a balance between ambition and achievability; while acknowledging the urgency of emission reduction, entities must also ensure sufficient allocation of financial and human resources to meet their targets. As such, a well-defined climate-related target enhances accountability and demonstrates measurable progress towards climate resilience.  

The SMART framework provides practical guidance for developing effective climate-related targets: 

Next steps for reporting 

As one of the pillars of climate-related disclosures, metrics and targets are essential for assessing performance against climate-related risks and opportunities. A clear understanding of metric types and effective target setting enables entities to turn climate strategy into measurable action and allows stakeholders to track progress over time.  

If the entity has yet to establish a climate-related target, start by ensuring the leadership recognises that climate action is integral to business strategy and long-term resilience. Analyse performance trends using existing metrics to understand your current state. For entities already working towards set targets, conduct a review to determine whether they can be refined or strengthened to reflect greater ambition.

For further guidance, refer to the “Metrics and targets” section of IFRS S2.