The Task Force on Climate-related Financial Disclosures officially disbanded in October 2023. Its successor—IFRS S2, issued by the International Sustainability Standards Board—is stricter, more data-driven, and already mandatory in parts of Southeast Asia. If your company is still submitting high-level climate statements, you are already behind.
From TCFD to IFRS S2: What Changed
TCFD gave companies a voluntary framework for four pillars: governance, strategy, risk management, and metrics & targets. It was influential. Over 4,000 organizations committed to disclosure. But the problem, as regulators discovered, was consistency. Companies interpreted "climate risk" at wildly different levels of detail. Many disclosed risks they had never actually quantified.
IFRS S2 inherits TCFD's four-pillar structure but eliminates the wiggle room:
- No more qualitative-only disclosures. IFRS S2 requires companies to identify specific climate hazards—acute and chronic—that affect their assets, operations, and value chains.
- Scenario analysis is mandatory. Companies must model how their business performs under at least two climate scenarios, including a scenario consistent with limiting warming to 1.5°C.
- Board governance is explicit. Climate risk must be overseen at board level, with disclosure of the governance structure.
- Scope 1, 2, and 3 GHG emissions must be disclosed, measured against the Greenhouse Gas Protocol.
- Physical risk must be geographically specific. You cannot disclose "drought risk" as a general concern—you must identify which assets, in which locations, face which hazards at what probability and magnitude.
That last requirement is where most Southeast Asian companies face the widest gap.
The Southeast Asia Regulatory Landscape
Malaysia: Already Mandatory
Malaysia moved fastest in the region. Bursa Malaysia announced in December 2024 that all listed companies must report using IFRS S1 and IFRS S2. For companies with a market capitalisation above RM 2 billion, the requirement took effect from January 2025. Main Market companies follow by 2026; ACE Market companies by 2027.
This means that today, right now, every large-cap Malaysian listed company—from plantation groups to palm oil processors to logistics conglomerates—must disclose their physical climate risks using the IFRS S2 framework. That includes acute physical risks such as drought, flood, and extreme heat.
Thailand: Phased Adoption in Progress
Thailand's Securities and Exchange Commission (SEC) is in active public consultation on IFRS S2 adoption, with phased implementation planned for large-cap issuers first. The Bank of Thailand (BOT) has separately mandated climate stress tests for commercial banks, requiring them to model how physical and transition risks affect their loan portfolios. The Bank of Thailand's own reporting explicitly cited El Niño-driven drought as a material risk to the Thai economy—contributing an estimated 50–78 billion Thai Baht in agricultural losses (0.29–0.45% of GDP) in 2024 alone.
For Thai companies with international investors, lenders, or supply-chain partners already subject to IFRS S2, the expectation of disclosure is arriving before the regulatory deadline.
Vietnam: Environmental Mandates Expanding
Vietnam operates under the Environmental Protection Law and Circular 155/2015, which requires listed companies and state-owned enterprises to submit annual environmental and social reports. From 2025, GHG measurement has been mandated for heavy-industry sectors. Vietnam's Ministry of Natural Resources and Environment is actively developing a national carbon market, which will require robust emissions and physical risk accounting as a foundation.
Companies operating in Vietnam's Mekong Delta—including rice exporters, shrimp aquaculture operators, and agri-food processors—face some of the region's highest physical climate risk exposure, particularly from seasonal drought and saltwater intrusion.
Drought: The Underreported Acute Physical Risk
Under IFRS S2, physical risks are split into two categories:
- Acute risks: Event-driven. Hurricanes, floods, extreme heat events—and drought.
- Chronic risks: Long-term shifts. Rising average temperatures, changing precipitation patterns, sea level rise.
Drought sits in the acute category. It is episodic, measurable, and directly tied to agricultural output, water availability, and energy generation. In Southeast Asia, it is also highly province-specific. The 2024 El Niño drought devastated rice and sugarcane output in Thailand's northern, northeastern, and western provinces—while coastal southern provinces experienced different conditions entirely. Vietnam's Central Highlands and lower Mekong provinces were affected differently from the Red River Delta. Malaysia's Sabah and Sarawak have different rainfall exposure than peninsular states.
A company sourcing rice from Nakhon Ratchasima Province faces a different physical risk profile than one sourcing from Chiang Rai—even though both are in Thailand. A company with palm oil operations in Kelantan faces different drought exposure than one in Johor. IFRS S2 requires you to know the difference.
What Good IFRS S2 Physical Risk Disclosure Actually Looks Like
Kasikornbank, one of Thailand's largest commercial banks, publishes one of the most detailed TCFD reports in the region—covering 39 out of 60 recommended disclosure indicators. Their physical risk methodology maps exposure at the asset and borrower level, not just at the national level.
That approach is the direction IFRS S2 is pushing every company—not just financial institutions. The standard explicitly states that companies should use "the most relevant and reliable" data available for their specific geographic exposure. For companies operating in SEA, that means:
- Identify your exposure provinces. Where are your farms, suppliers, factories, and logistics hubs? Not just by country—by province.
- Quantify drought risk at province level. What is the historical drought frequency and severity for each province? What do climate scenarios suggest for 2030, 2050?
- Model the financial materiality. For a company sourcing 40% of its raw materials from high-drought-risk provinces, what revenue impact follows a severe drought year? What is the probability of that event in any given year?
- Disclose with specificity. Name the risk, the geography, the scenario used, and the methodology. Qualitative statements such as "we face climate risk in our supply chain" no longer meet the IFRS S2 threshold.
The Data Challenge—and Why It Is Solvable
The most common objection companies raise is a data problem: "We don't have province-level climate data." This was a legitimate limitation three years ago. It is no longer the case.
Province-level drought intelligence for Thailand (77 provinces), Vietnam (63 provinces), and Malaysia (16 states) is now available via processed ERA5 reanalysis data—the same global climate dataset used by the European Centre for Medium-Range Weather Forecasts. The GlobMaps Multi-Dimensional Index (MDI) aggregates multiple drought indicators at province level, updated monthly, with multi-year historical baselines.
This data maps directly to the IFRS S2 physical risk disclosure workflow:
- Identify which provinces in your supply chain show elevated drought stress (MDI scores)
- Use historical severity distribution to support scenario analysis assumptions
- Attach quantitative drought metrics to your asset-level risk register
- Update disclosure annually with current-year MDI data as part of your climate metrics reporting
The standard does not require you to run your own climate model. It requires that you use credible, documented, open-methodology data to support your disclosures. Province-level MDI data is precisely that.
Timeline: When You Need to Act
| Market | Who | When |
|---|---|---|
| Malaysia | Market cap > RM 2B | From January 2025 (reporting now) |
| Malaysia | Main Market (other) | 2026 |
| Malaysia | ACE Market | 2027 |
| Thailand | Large-cap SET issuers | Phased 2025–2026 (consult underway) |
| Vietnam | Heavy industry / SOEs | GHG mandatory 2025; IFRS S2 roadmap in progress |
But regulatory deadlines are not the only clock running. International investors increasingly require IFRS S2-aligned disclosure as part of due diligence. Supply-chain customers in the EU—subject to the Corporate Sustainability Reporting Directive (CSRD)—are beginning to push physical risk data requirements down to their SEA suppliers. For companies with European customers or investors, the demand is arriving now.
The Bottom Line
TCFD shaped a decade of climate disclosure practice. IFRS S2 is raising the bar—from principles to data, from voluntary to mandatory, from national to provincial. In Southeast Asia, the region's most material climate risk—drought—is also the one most companies have failed to quantify at the geographic resolution the standard now demands.
Province-level drought intelligence is no longer a research exercise. It is a disclosure input.
GlobMaps Climate Intelligence covers 156 provinces across Thailand, Vietnam, and Malaysia with monthly MDI drought data. Platform Pro and Bundle Pro plans include API access for integration into ESG reporting workflows. Contact us at hello@globmaps.com to learn more.