ISSB: Climate-related Disclosures [ED]

Com­ment pe­riod ends on July 29, 2022

Next steps:

The ISSB will review the Exposure Draft feedback in H2/2022

Proposed Effective Date:

 

The ISSB intends to decide on the effective date of the new standard after the exposure period. Earlier application will be permitted

Last updated:

June 2022

Overview

On March 31, 2022, the International Sustainability Standards Board (ISSB) have published the Exposure Draft, “Climate-related Disclosures” that builds on the Technical Readiness Working Group (TRWG) prototype of the same name that was issued in November 2021. The resulting standard would be the first thematic standard of the ISSB.

The main proposals in the Exposure Draft reflect the proposals in the prototype and are structured around the four pillars of governance, strategy, risk management, and metrics and targets established by the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board. Some changes were made to improve specificity and clarity with some added disclosure requirements. One noticeable change regards the internationalization of metrics that referred to specific jurisdictions. The proposals cover the following aspects of climate-related disclosures:

Objective: The proposed objective of the standard is to require an entity to disclose information about its exposure to climate-related risks and opportunities that would enable users of an entity’s general purpose financial reporting to assess the effects of significant climate-related risks and opportunities on the entity’s enterprise value, to understand how the entity’s use of resources support the entity’s response to significant climate-related risks and opportunities, and to evaluate the entity’s ability to adapt to significant climate-related risks and opportunities.

Scope: The standard would apply to climate-related risks that the entity is exposed to, including physical risks and transitional risks, and to climate-related opportunities available to the entity. Governance: Under the proposed standard, an entity would disclose information that enables users of general purpose financial reporting to understand the governance processes, controls and procedures used to monitor and manage climate-related risks and opportunities. This would include information about the governance body or bodies with oversight of climate-related risks and opportunities, and a description of management’s role regarding climate-related risks and opportunities.

Strategy: An entity would disclose information that enables users of general purpose financial reporting to understand the strategy for addressing climate-related risks and opportunities. This would include information about: (i) the significant climate-related risks and opportunities that it reasonably expects could affect its business model, strategy and cash flows, its access to finance and its cost of capital, (ii) the effects of them on its business model, value chain, strategy and decision-making, financial position, financial performance and cash flows, and (iii) the climate resilience of its strategy to significant physical risks and significant transition risks.

Risk management: An entity would disclose information that enables users of general purpose financial reporting to understand how climate-related risks are identified, assessed, and managed. This would include information about: (i) the process, or processes, used to identify climate-related risks and opportunities, and climate-related risks for risk management purposes, (ii) the process, or processes, used to identify, assess and prioritize climate-related opportunities; (iii) the process, or processes, it uses to monitor and manage the climate-related risks, and (iv) the extent to which and how the climate-related risk identification, assessment and management process, or processes, are integrated into the entity’s overall risk management process and the entity’s overall management process.

Metrics and targets: An entity would disclose information that enables users of general purpose financial reporting to understand the entity’s performance in measuring, monitoring and managing climate-related risks and opportunities. This would include information about cross-industry metric categories, industry-based metrics other metrics used by the board or management to measure progress towards its targets, and targets set by the entity to mitigate or adapt to climate-related risks or maximize climate-related opportunities so that users of general purpose financial reporting can understand how the entity assesses its performance and its progress towards the targets it has set.

The deadline for submitting comments on these proposals is July 29, 2022.

Additional information is available on the IFRS Foundation website, including the following:

 

 

Other developments

June 2022

On June 1, 2022, Financial Reporting & Assurance Standards (FRAS) Canada issued a consultation project to solicit feedback from Canadians on the International Sustainability Standards Board’s (ISSB) Exposure Draft IFRS S2 “Climate-related Disclosures.”

March 2022

On March 31, 2022, the ISSB published the Exposure Draft, “Climate-related Disclosures”. The deadline for submitting comments on these proposals is July 29, 2022.

 

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