A study of the Global Large-Mid Cap Equities Index, covering 3,373 companies, revealed that they need to be on track to keep global warming under 1.5 degrees Celsius by 2050. Only 19% are moderately aligned with temperature increases projected between 1.5 and 2 degrees Celsius. The majority are set for a rise of 2 to 3 degrees, with 23% highly misaligned (3-4 degrees increase) and 15% severely misaligned (over 4 degrees increase).

The analysis by Morningstar’s Sustainalytics evaluated the companies using Low-Carbon Transition Ratings. It highlighted significant transition risks in the energy sector due to its carbon-intensive operations, while the consumer goods sectors showed limited preparedness in managing baseline emissions. This research aims to help investors understand climate-related risks and develop informed investment strategies.

Access the brief on ESG Dive’s website and the study report on the Morningstar’s web site.

In March 2024, the CSSB published its proposals for the first Canadian Sustainability Disclosure Standards (CSDSs) based on IFRS S1 and IFRS S2, albeit with exemptions. Ten major Canadian pension funds have now responded with a joint statement.

The statement notes that global adoption of the ISSB standards as proposed is the “only credible route to secure the ISSB’s equivalence with the European Sustainability Reporting Standards (ESRS):

“Failure to adopt the global baseline in Canada may not only risk issuers falling short of meeting international and domestic investors’ expectations of their directors to oversee corporate strategy in the near-term, but also risk issuers having to adopt Canada’s final standards and European reporting standards, which could be more onerous for issuers over time.”

In particular, the pension funds take issue with the CSSB’s sustainability-related disclosures transition relief, which, they argue, might put Canadian companies at a disadvantage to foreign entities that are reporting across all sustainability-related metrics. On the transition reliefs proposed for the climate standard, the pension funds query the suggested two-year reporting exemption for Scope 3 disclosures and the CSSB’s suggestion for exemptions on conducting scenario analysis.

The statement notes that the pension funds "support the ISSB’s “building block” approach, which allows for additions to the global baseline and limits modifications or deletions." It continues to say:

“Therefore, we recommend that the CSSB consider only additions to the ISSB baseline when unique circumstances arise in the Canadian public interest, such as addressing the rights of Indigenous Peoples. We believe this approach would best serve the ISSB’s objective of achieving interoperability across jurisdictions.”

Access the statement on the CSSB’s website.

The guidance covers the following eight real economy sectors:

• Aquaculture 
• Biotechnology and Pharmaceuticals 
• Chemicals 
• Electric Utilities and Power Generators 
• Food and Agriculture 
• Forestry and Paper 
• Metals and Mining 
• Oil and Gas

At the same time, additional guidance for financial institutions and value chains has been released. The guidance for financial institutions includes guidance on the TNFD recommended disclosures and disclosure metrics for banks, (re)insurance companies, asset managers and owners, and development finance institutions. The guidance on value chain details how organizations can analyze their upstream and downstream value chains. 

Access the press release and the guidance on the TNFD’s website.

Commissioner Peirce emphasized the challenges in quantifying diverse ESG factors such as climate change, biodiversity, and labour rights, which complicate their integration into consistent investment strategies. She criticized the shifting standards of ESG compliance, which add to the complexity and inconsistency in evaluations. Additionally, she pointed out potential conflicts with the fiduciary duties of asset managers, who should prioritize financial returns for investors. Still, she may be swayed by the broad ESG mandates to make decisions not aligned with shareholder interests.

Concluding her speech, Commissioner Peirce called for a return to principles-based regulatory approaches that focus on material financial information rather than expansive ESG criteria. She advocated for more precise definitions and stricter criteria to ensure that ESG measures contribute to sustainable growth without undermining economic dynamism and financial integrity. This approach, she argued, would prevent ESG metrics from diverting corporate attention from innovation and value creation.

Access the speech on the SEC’s website.

IFAC Chief Executive Officer, Lee White highlighted the crucial role of professional accountants in the global transition towards sustainable business practices, emphasizing their expertise in data analysis and innovation. He noted that sustainability assurance might initially differ from traditional financial reporting, potentially including modified assurance reports to reflect these changes.

As global policymakers and regulators rapidly introduce new requirements for sustainability reporting and assurance, IFAC advocates for a harmonized, global disclosure system and continues to collaborate with international organizations like the IFRS Foundation, ISSB, and IOSCO. Additionally, sample reports are provided within the publication to offer practical insights and guidance for preparers.

Access the publication on the IFAC’s website.

ISSB Chair Emmanuel Faber announced a new two-year work plan and a Feedback Statement during the IFRS Foundation Conference coinciding with London Climate Action Week. This initiative seeks to consolidate various frameworks and standards under the ISSB, reducing the complexity and fragmentation of sustainability disclosures. Key relationships have been strengthened with organizations such as the GHG Protocol, CDP, and the Global Reporting Initiative to align and enhance the quality and comparability of sustainability data.

A significant focus of the ISSB's efforts is on harmonizing disclosures related to corporate transition plans and GHG emissions. This includes taking responsibility for the Transition Plan Taskforce's disclosure materials and maintaining alignment with the GHG Protocol standards through strategic partnerships and memorandums of understanding. These efforts aim to provide the market with transparent, consistent, and decision-useful sustainability information, reducing fragmentation and improving transparency.

Overall, the ISSB's work is supported by over 20 jurisdictions worldwide, integrating ISSB standards into their regulatory frameworks to create a global baseline for high-quality sustainability disclosures. This international initiative reflects a shift towards a unified approach to financial and sustainability reporting to meet the evolving needs of investors and stakeholders and support sustainable investment decisions globally.

Access the press release on the IFRS Foundation website.

The podcast discusses the following:

• Developments already reported on, including:
• IFRS Foundation and GRI aim to deliver full interoperability between ISSB and GRI standards
• CDP launches new disclosure platform
• Major economies advance towards unified sustainability standards
• Sustainability Standards Conference 2024 in Frankfurt;
• June ISSB meeting; and
• ISSB consultative body meetings

Access the press release on the IFRS Foundation website.

During the 23rd Annual International Conference on Policy Challenges for the Financial Sector held in Washington, OSFI’s Assistant Superintendent, Regulatory Response Sector, Tolga Yalkin, provided a comprehensive overview of how climate-related risks influence Canada's financial landscape. He highlighted the increasing frequency and severity of physical risks, such as extreme weather events, impacting property and casualty insurers' reinsurance and net retentions, potentially leading to earnings or capital volatility. He also addressed the growing transition risks stemming from international policy divergences on greenhouse gas emissions reductions, which could lead to a disorderly transition, further complicating the financial sector's stability.

The Assistant Superintendent detailed the role of the Standardized Climate Scenario Exercise (SCSE), a tool introduced by OSFI to assess and manage climate-related risks more effectively. This exercise analyzes various hypothetical scenarios to gauge potential impacts on financial institutions and the broader industry. He outlined this tool's two-phase public consultation process, which included information sessions and technical briefings on specific risk topics such as physical, credit, and market risks. The final exercise is scheduled for publication in the fall, with results from financial institutions expected by the end of the year.

The speech underscored OSFI's commitment to enhancing transparency and accountability in climate risk management and supervision within the Canadian financial sector.

Access the speech on the OSFI’s website.

IG 1 Materiality Assessment Implementation Guidance provides an illustrative materiality assessment process for entities and develops the concept of impact and financial materiality on examples, including how these concepts interact. It also contains FAQs on the double materiality assessment to provide practical implementation guidance on disclosing material impacts, risks and opportunities.

IG 2 Value Chain Implementation Guidance outlines the reporting requirements for value chain information, including the materiality assessment, policies and actions, and metrics and targets. It illustrates the reporting boundary for a group for sustainability reporting, including operational control in environmental standards. The IG also includes FAQs for further information and a 'value chain map' summarising the implications for each disclosure requirement across all ESRS.

IG 3 List of ESRS Datapoints includes all requirements in the complete first set of ESRS in an Excel format. The file contains additional information, such as the requirement types (quantitative or qualitative) or whether these are subject to transitional provisions. IG 3 has been published together with an explanatory note.

The EFRAG Secretariat has also published feedback statements illustrating how the feedback received during the consultation has been reflected in the final documents.

Access the press release on EFRAG’s website.

The document emphasizes the necessity for entities to incorporate climate-related risks and opportunities into their risk assessments and financial statements, similar to other business risks. The document guides entities on recognizing, presenting, and disclosing material climate-related matters by the Accounting Standards for Private Enterprises (ASPE), even though no specific climate-related accounting standard exists.

The document also discusses how various industries might be differently affected by climate-related issues and suggests that the assessment and potential disclosures should be tailored accordingly. It highlights new opportunities and challenges as entities and financial institutions respond to evolving climate regulations, such as new procurement opportunities and enhanced financing options. Furthermore, the document serves as an introduction to a series of forthcoming awareness documents from the Accounting Standards Board, which will provide detailed guidance on applying ASPE standards when assessing climate-related matters, with adaptability for not-for-profit organizations.

Access the document on the IFRS Foundation website.