Financial institutions are accelerating adoption of the International Sustainability Standards Board’s disclosure framework, but a widening gap between regulatory ambition and operational readiness is emerging across the sector.
A joint survey by PwC and the Institute of International Finance (IIF), conducted between November and December 2025, examined 24 global financial institutions representing more than $18 trillion in assets. The results show widespread preparation for the ISSB’s two core disclosure standards — IFRS S1, covering sustainability-related financial disclosures, and IFRS S2, focused on climate-related risks.
Among respondents, 22 institutions are implementing or considering IFRS S1, while 23 are doing the same for IFRS S2, with adoption occurring through both voluntary initiatives and regulatory mandates across different jurisdictions.
The findings suggest that while global sustainability disclosure rules are advancing rapidly, many institutions are still building the data infrastructure, governance frameworks and analytical capabilities required to produce investor-grade reporting.
As regulators and capital markets increasingly expect consistent sustainability disclosures, the ability to operationalise ISSB reporting is emerging as a significant operational and regulatory challenge for the global banking sector.
The Core Risk Signal
The survey points not to resistance to sustainability disclosure, but to execution strain within financial institutions’ reporting systems.
Respondents identified estimating the financial impact of sustainability risks as the most significant compliance challenge under both ISSB standards. Among institutions implementing or considering IFRS S1, 10 of 22 respondents ranked this issue among their top challenges, while 8 of 23 cited the same concern under IFRS S2.
The difficulty lies in translating climate and sustainability exposures into quantifiable financial outcomes over long time horizons, often extending well beyond the timeframes used in traditional corporate forecasting and financial planning.
Producing these disclosures requires institutions to develop new datasets, modelling frameworks and governance processes capable of linking sustainability risks to financial performance in a way that meets capital market expectations.
As sustainability disclosures move closer to the rigour of financial reporting, the ability to produce reliable, traceable data is becoming a core operational capability for financial institutions rather than a purely compliance-driven exercise.
Balance Sheet & Market Exposure
The survey suggests the primary pressure points sit within reporting systems, data infrastructure and organisational capabilities, rather than in immediate balance sheet stress.
Many institutions still rely on manual or partially manual processes to calculate key sustainability metrics. Among respondents implementing or considering IFRS S2, 30% continue to rely on spreadsheets for emissions calculations, while 22% use hybrid systems combining manual and automated processes.
Financial institutions also face significant dependency on counterparty disclosures when estimating financed emissions and other climate-related exposures. According to the survey, 48% of respondents ranked inadequate counterparty reporting among the top challenges for IFRS S2, while 27% cited the issue for IFRS S1.
A lack of standardised definitions and measurement methodologies further complicates the reporting process. More than half of institutions implementing or considering ISSB standards identified this lack of standardisation as one of the most significant barriers to producing consistent disclosures.
For large financial institutions, the operational burden of sustainability reporting is becoming financially material. Building ISSB reporting capability requires new data infrastructure, expanded reporting controls and verification processes similar to those used in financial reporting.
As sustainability disclosures increasingly intersect with investor communications and regulatory oversight, reporting failures could carry reputational, regulatory and capital-market consequences.
Policy Path & Regulatory Direction
The findings point to a broader regulatory shift toward establishing ISSB standards as the global baseline for sustainability disclosures.
Implementation, however, is unfolding within a fragmented regulatory landscape. All surveyed institutions continue to report under the Task Force on Climate-related Financial Disclosures (TCFD) framework, while many also rely on Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) standards alongside ISSB.
This multi-framework reporting environment increases operational complexity for financial institutions operating across multiple jurisdictions.
Maintaining alignment with the global ISSB baseline while adapting to local regulatory requirements is therefore emerging as a key supervisory challenge. Deviations from the global baseline by local regulators risk increasing compliance costs and reducing comparability across financial institutions.
Governance structures inside organisations are also evolving. Sustainability or ESG teams often lead ISSB implementation, while finance and controllership functions are becoming more involved as sustainability disclosures move closer to traditional financial reporting frameworks.
Market Pricing & Investor Implications
For investors, the expansion of ISSB reporting is likely to influence how climate and sustainability risks are evaluated and priced across financial markets.
As disclosures become more standardised, asset managers, credit analysts and institutional investors may gain clearer visibility into climate exposures, transition risks and financed emissions across financial institutions.
Over time, this increased transparency could influence credit analysis, equity valuations and capital allocation decisions, particularly in sectors facing significant climate transition risk.
However, the survey indicates that comparability across institutions remains limited for now. Differences in materiality assessments, data availability and reporting methodologies continue to create inconsistencies in sustainability disclosures across the industry.
Until reporting practices mature and methodologies converge, investors may face challenges in comparing climate-related exposures across financial institutions and portfolios.
Forward Risk Triggers — What to Watch
The pace of ISSB adoption will ultimately depend on how quickly financial institutions can close the operational and data gaps highlighted in the survey.
A notable execution gap remains. None of the surveyed institutions reported having fully adequate internal technology systems currently in place to support ISSB implementation, while only 13% indicated they have sufficient skills and headcount to manage the reporting requirements.
Progress in several areas will determine how quickly reporting capabilities mature. These include the development of standardised sustainability measurement methodologies, improved data availability from counterparties and portfolio companies, and the evolution of financial materiality frameworks for sustainability risks.
At the same time, continued investment in technology systems, data infrastructure and specialist reporting expertise will be necessary if financial institutions are to produce consistent sustainability disclosures that meet investor and regulatory expectations.
Strategic Bottom Line
The findings indicate that global sustainability disclosure standards are advancing rapidly across the financial sector, but institutions’ ability to implement them remains uneven.
Rather than signalling immediate financial instability, the survey points to a structural operational challenge as financial institutions build the data infrastructure, governance frameworks and analytical capabilities needed to produce reliable, investor-grade sustainability disclosures.
For banks, asset managers and corporate treasuries, the evolution of ISSB reporting is likely to influence risk management frameworks, capital allocation decisions and long-term balance-sheet planning, as sustainability risks become increasingly embedded in financial analysis and investor expectations.
