The article's primary focus is on how IFRS S2 affects climate-related reporting on financial risk mitigation strategies in oil and gas companies in the Gulf Cooperation Council. This study takes advantage of the fact that there are varying levels in the regulatory needs across the six GCC states and has used a quasi-experimental design to establish the causality of this relationship. The United Arab Emirates and the Kingdom of Saudi Arabia (KSA), however, have chosen to adopt a regulated, mandatory framework. Additional GCC nations, like Bahrain, Oman, Kuwait, and Qatar, have kept these structures up to date and made them freely accessible. We estimate the difference-in-differences estimation and structural equation modeling results of 95 companies covering 2018 to 2024 (665 firm-year observations) to conclude that mandatory IFRS S2 Reporting significantly enhances climate disclosure quality by 34.2 percentage points. Furthermore, it has beneficial economic implications: a 180-basis-point lower cost of capital, a 31 percent higher firm valuation, and a 33 percent lower earnings volatility. Structural equation modelling shows that improved risk management performance is the mediating factor. When the analysis is cross-sectional, the effects are heterogeneous, and the benefits are magnified in firms with high carbon intensity. Causal interpretation has been supported using our extensive robustness tests. Findings from this research provide an innovative empirical basis for the influence of IFRS S2 on carbon-intensive industries. The research offers essential recommendations to policymakers and corporate executives seeking to address the challenges posed by financial risks and climate change in the context of the current energy transition, confirming the benefits of mandatory reporting systems over voluntary ones.