Climate Risk Reporting Challenges 62% of Mexican Firms: EY

Mexican companies face significant governance and reporting challenges as they begin implementing the mandatory IFRS S1 and S2 sustainability disclosure standards, with 62% of preparers unable to quantify the financial impact of climate-related risks. These capability gaps complicate compliance as regulatory updates from the CNBV and CINIF phase out transitional relief measures. Closing them will be critical for companies to meet disclosure requirements, comply with increasingly stringent international trade standards, and preserve their position in global supply chains.

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Last year, Mexico’s National Banking and Securities Commission (CNBV) implemented new regulations requiring non-financial securities issuers to publish standalone sustainability reports fully aligned with the International Financial Reporting Standards for Sustainability (IFRS S1 and S2). At the same time, the Mexican Financial and Sustainability Reporting Standards Board (CINIF) published its Sustainability Reporting Standards (NIS), incorporating 30 mandatory sustainability indicators into the notes accompanying annual financial statements. With the first IFRS-aligned sustainability reports — covering 2025 operations — released during the first half of 2026, analysts are beginning to assess how Mexican companies have adapted to these reporting requirements, the first of their kind in Latin America. 

According to a new report by professional services firm EY, transforming non-financial disclosures from a compliance exercise into a strategic business tool remains the primary challenge for regulated companies in Mexico. The report, which examines how organizations are navigating the new mandatory framework, argues that companies integrating climate and sustainability risks directly into their business models and financial metrics are better positioned to implement effective mitigation strategies.

To assess the market's response, EY reviewed 77 publicly available sustainability reports and surveyed 34 corporate preparers. Of the approximately 320 companies required to comply, 84% met the requirements during the first reporting cycle. In total, 193 organizations issued regulatory notices, while 77 published detailed public sustainability reports.

Among survey respondents, 44% described the reporting process as demanding, 38% as challenging, and 6% as very challenging. By comparison, 38% reported a moderate level of difficulty, while 18% experienced relatively few challenges. To ease implementation, 84% of compliant companies relied on the transitional reliefs permitted under the IFRS framework, indicating that technical maturity remains a work in progress across much of the private sector.

For Miguel Chavarría, Head of Advisory for Latin America and the Caribbean, South Pole, the new requirements fundamentally reshape how companies approach sustainability. "For too long, Mexican boardrooms treated sustainability as a reputational exercise — the domain of public relations and communications teams — with the annual report as the ultimate objective," Chavarría said. "That era is definitely over."

Widespread Use of Transitional Reliefs

The distribution of published sustainability reports reveals varying levels of preparedness across industries. Financial institutions and asset managers led first-cycle compliance, while industrial and manufacturing companies lagged behind.

To manage the technical complexity of the inaugural reporting cycle, 84% of compliant companies made use of transitional reliefs permitted under IFRS. Specifically, 77% applied the comparative information relief, while 75% used the climate-first disclosure relief. In addition, 71% took advantage of reporting deadline extensions, 51% deferred Scope 3 emissions disclosures, and 18% used an emissions accounting methodology other than the Greenhouse Gas (GHG) Protocol.

Chavarría argues that the widespread use of these reliefs reflects a strategic prioritization of resources rather than a retreat from sustainability commitments. Although public communications have become more restrained amid what he describes as "greenhushing," 85% of companies are maintaining or accelerating their climate objectives, while only 13% have weakened their targets.

Methodological Variations

70% of preparers incorporated sustainability disclosures into their existing corporate reports, while 21% reported sustainability information publicly for the first time. Only 6% fully transitioned to a reporting structure based exclusively on the IFRS Sustainability Standards. Additionally, 70% of issuers incorporated sector-specific standards from the Sustainability Accounting Standards Board (SASB), while 31% included selected Global Reporting Initiative (GRI) indicators.

Methodological differences were particularly evident in climate risk assessments. Although 55% of reporting organizations evaluated climate-related risks, they did so without conducting formal climate scenario analyses. For physical risk assessments, only 31% evaluated exposure using one to three climate scenarios. Meanwhile, 31% of companies failed to identify or disclose any material transition risks, highlighting persistent gaps in climate risk assessment and disclosure.

Financial Traceability Deficits

The greatest implementation challenge has been translating sustainability metrics into measurable financial impacts. 62% of respondents identified quantifying the current and anticipated financial effects of climate risks as their biggest obstacle. Another 50% reported difficulties assessing how sustainability-related risks and opportunities affect their business models and value chains. Additional challenges — including risk identification, integration into enterprise risk management, target setting, and resilience assessments — also created significant implementation hurdles.

These shortcomings are reflected in current disclosures. 44% of published reports indicated no material financial impacts during the reporting period, while 31% provided disclosures that were either unclear or omitted altogether. Notably, only 5% of the reports included explicit cross-references to the company's primary financial statements, demonstrating a significant disconnect between sustainability reporting and financial reporting.

Looking ahead, 51% of companies disclosed anticipated financial impacts only through qualitative narratives, while 26% provided no forward-looking information. Just 13% combined qualitative descriptions with limited quantitative estimates for specific risks, and only 9% provided comprehensive qualitative and quantitative disclosures covering all identified risks and opportunities.

Emissions Reporting

Significant information gaps also remain in greenhouse gas accounting and long-term climate commitments. Although 64% of companies calculate emissions using the GHG Protocol, 62% of published reports omitted Scope 3 emissions entirely. These indirect emissions, generated throughout a company's value chain, typically account for the majority of its carbon footprint.

Meanwhile, long-term climate commitments remain noticeably limited. Only 5.2% of reports included verified net-zero targets, while 13% disclosed broader net-zero ambitions or commitments. Moreover, only 25% of reporting organizations had established public greenhouse gas reduction targets before IFRS S1 and S2 became mandatory in Mexico.

Governance Constraints and Future Assurance Requirements

Per the report, governance practices related to sustainability reporting remain significantly underdeveloped. Approximately 62.3% of companies do not incorporate climate-related metrics into executive compensation. Only 14.3% include such metrics for executive committee members, while 13% apply them exclusively below the executive level. Another 10.4% did not disclose whether climate metrics influence executive compensation.

The same disconnect is evident in the application of key reporting principles. While 57% of organizations disclosed the professional judgments used in preparing their reports and 60% identified areas subject to measurement uncertainty, 42% submitted only the regulator's questionnaire without publishing a comprehensive sustainability report.

Corporate sustainability budgets also remain heavily compliance-driven. Forty percent of spending is devoted entirely to regulatory compliance, while another 30% is allocated to renewable energy procurement and energy mix initiatives, leaving only 14% for emerging priorities such as biodiversity and nature-related projects.

Regulatory Requirements Tighten in 2027

Reporting requirements will become more stringent beginning with the second reporting cycle in 2027 as several transitional reliefs expire. The elimination of the climate-first disclosure relief will require companies to report on all material sustainability-related risks under IFRS S1, while comprehensive Scope 3 emissions disclosures will also become mandatory.

In addition, sustainability reports will be subject to independent limited assurance, requiring companies to establish stronger internal controls ahead of the eventual transition to mandatory reasonable assurance.

These evolving requirements are also being reinforced by international trade dynamics. European customers complying with the Carbon Border Adjustment Mechanism (CBAM) and US companies seeking to reduce supply-chain risks are increasingly favoring suppliers capable of providing independently verified climate data, making transparent sustainability reporting a growing prerequisite for participating in global value chains.

Chavarría outlines the global trade consequences directly: "Sourcing from suppliers that provide audited data and credible transition plans is no longer just about reputation; it is a risk-mitigation strategy.” He concludes that only Mexican suppliers with transparent, high-quality climate metrics are likely to secure preferred-vendor status and access to high-value, “green-premium” market segments.