Global Adoption of IFRS Standards: How Latin America is Leading the Way

The global shift toward standardized sustainability reporting is accelerating, and with the introduction of IFRS S1 and S2 by the International Sustainability Standards Board (ISSB), the landscape for corporate disclosures is entering a new era. These standards represent a decisive step toward providing clear, consistent, and investor-relevant sustainability and climate-related information. While the world adjusts to these new expectations, Latin America is distinguishing itself as a region not just keeping pace – but leading. For investors and executives alike, this regional momentum signals opportunity, stability, and a competitive edge.

The Basics: IFRS S1 and S2

IFRS S1 sets out the general requirements for disclosing sustainability-related financial information, while IFRS S2 focuses specifically on climate-related disclosures. Both are grounded in frameworks that investors already trust: the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB). Together, these standards aim to make sustainability reporting as reliable and comparable as financial statements – something capital markets increasingly demand.

For executives, this is not just about transparency; it is about aligning sustainability with strategy, improving risk oversight, and enhancing access to capital. For investors, it's about clarity, performance insight, decision-useful data and building financial resilience.

Adoption in Latin America

Latin America's commitment to sustainability is evident in its growing environmental, social and governance (ESG) investing market, which generated a revenue of over USD 1.8 billion 2024 and is projected to reach over USD 4.5 billion by 2030, reflecting a compound annual growth rate (CAGR) of 17.7% from 2025 to 2030.

However, challenges remain. While a growing number of companies in Latin America are aligning their sustainability reports with international frameworks such as the GRI and SASB Standards, the presence of formal governance structures is still limited. Only 44% of companies report having a board-level committee dedicated to sustainability, and just 27% incorporate sustainability considerations into executive compensation schemes, suggesting that roles such as a Head of Sustainability are not yet widely institutionalized. Additionally, many companies continue to struggle with the development and consistent monitoring of key performance indicators (KPIs), highlighting ongoing gaps in data quality, standardization, and assurance (OECD, 2023)

Despite these hurdles, the region is making significant strides. In Mexico, sustainability reporting is being reinforced through the Normas de Información en Sostenibilidad (NIS), which provide structured guidance for issuers based on TCFD and SASB principles. These standards lay a foundation for convergence with IFRS S1 and S2, enabling Mexican companies to align early with global expectations.

Costa Rica, known for its environmental leadership, is exploring how to integrate international sustainability standards into its financial ecosystem to remain attractive to global capital. This proactive approach underscores the country's commitment to sustainability and positions it favorably in the eyes of investors.

Chile, Colombia, and Brazil are also leading examples of this regional momentum. Chile has made significant advances in corporate climate disclosure and is actively aligning its regulatory frameworks with international standards. Colombia has integrated ESG requirements into capital markets oversight and promotes adoption among listed companies. Brazil, through its securities regulator, has committed to implementing the ISSB standards as part of its sustainability disclosure roadmap. These countries illustrate how leadership at the national level is driving market transformation across Latin America.

The Business Case for Sustainability

For executives leading companies in the region, aligning with these standards now is a strategic decision. Adoption signals to the market that your company is managing risks, thinking long-term, and ready to meet international stakeholder expectations. The benefits are direct and tangible: improved access to financing, better engagement with international investors, and enhanced reputation. More importantly, it equips companies to navigate emerging global regulations. For instance, the EU’s Corporate Sustainability Reporting Directive (CSRD) will soon affect Latin American companies that do business in Europe. Compliance is no longer optional – it is becoming a prerequisite for market participation.

Investors are increasingly allocating capital toward companies that show credible progress on sustainability. IFRS S1 and S2 give those investors the tools they need to compare performance and risk exposure across markets and sectors. For regional companies that act now, this is a chance to differentiate themselves, not just in Latin America but on the global stage. The opportunity is not just to comply, but to lead.

How Companies Can Get Ahead

For executives considering the next steps, a strategic approach is key:

• Conduct a gap analysis of your current reporting practices against IFRS S1 and S2.
• Invest in internal training across finance, sustainability, and risk teams to embed the new standards into operations.
• Leverage existing disclosures under TCFD, SASB, or NIS as building blocks for alignment.
• Engage key stakeholders—including your board, auditors, and investors—early to ensure alignment and transparency.
• Consider voluntary early adoption even if not yet mandatory in your jurisdiction, as it positions your company as a regional leader and prepares you for a future where these standards are likely to become the norm.

Latin America is no longer following. It is leading. The proactive adoption of IFRS S1 and S2 reflects a broader recognition that sustainable business is smart business. For executives and investors alike, this moment presents a strategic inflection point. The path forward is clear: align with global sustainability standards not just to comply, but to thrive.

If we can be helpful as you consider how these insights will affect your business, please don’t hesitate to reach out to our team.

David Araya, Analyst, Third Economy

david.araya@thirdeconomy.com

Jose Alfaro, Advisor, Third Economy

jose.alfaro@thirdeconomy.com

Disclaimer: The information provided does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only.