From Disclosure to Capital: Why Costa Rica's Taxonomy and IFRS S2 Work Better Together

Sustainability reporting often fails at the moment it should matter most: when a company translates commitments into financing decisions. Costa Rica is building the infrastructure to close that gap, and two pieces of that infrastructure fit together better than many organizations realize.

First, Costa Rica is adopting IFRS S1 and S2. The ISSB Standards may be applied voluntarily for fiscal years beginning on or after January 1, 2024, with mandatory application for CONASSIF-regulated publicly accountable entities and large taxpayers beginning for fiscal years on or after January 1, 2027. First required reports will be published in 2028. The ISSB framework centers on enterprise value: disclose material sustainability and climate-related risks and opportunities in a way that investors and lenders can use and compare across companies.

Second, Costa Rica's Sustainable Finance Taxonomy, launched in 2024, provides a common reference for what qualifies as an environmentally sustainable investment. Developed under the leadership of MINAE, the Ministry of Finance, the Central Bank, and key financial superintendencies, the taxonomy identifies priority sectors including construction, transport, energy, manufacturing, and agriculture. A 2025 phase has begun to test taxonomy application with the finance industry and provide recommendations to embed the taxonomy into a regulatory framework, with work also progressing toward a second phase focused on biodiversity-related activities.

Why This Combination Matters

Used together, these tools can transform capital conversations by aligning three elements that are usually disconnected: technical eligibility, strategic intent, and financial relevance.

IFRS S2 requires clarity on climate risks, scenario resilience, transition plans, and metrics and targets. The taxonomy creates a shared language for "what counts," helping lenders and investors evaluate eligibility and credibility while reducing greenwashing risk.

The result is a system where disclosure informs capital allocation decisions, and capital allocation decisions validate the credibility of disclosure.

A Practical Playbook for 2026

1. Map capital plans to taxonomy criteria: Align capital expenditures and operating initiatives with taxonomy activities and criteria, even if labeled financing is not an immediate priority. This surfaces evidence gaps early and builds credibility over time.
2. Integrate transition metrics: Align transition plan KPIs with ISSB disclosure requirements so the same metrics support reporting, budgeting, and financing discussions. Consistency across these three functions reduces implementation friction and strengthens the investment case.
3. Prepare an integrated narrative: Develop an investment case that links taxonomy alignment (what will be financed) with IFRS S2 disclosures (why it matters to enterprise value and resilience). This narrative becomes the foundation for conversations with lenders, investors, and rating agencies.

What to Expect

Costa Rica's advantage is not simply producing more reports. The advantage is that disclosure and capital allocation can reinforce each other within a coherent regulatory framework. Companies that learn to operate in this system before 2028 will help define the market standard when mandatory reporting arrives.

Organizations that execute this well will find that taxonomy alignment strengthens IFRS S2 disclosures, and IFRS S2 disclosures make taxonomy-aligned investments more defensible. The two frameworks are designed to work together—the question is whether your organization will be ready to use them that way.

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.