Climate-related Disclosures

Date recorded:

Cover note and summary of redeliberations (Agenda Paper 4)

At this meeting, the ISSB continued redeliberating the proposals in the Exposure Draft (ED) IFRS S2 Climate-related Disclosure ([draft] S2), in particular, by continuing the redeliberations of:

  • The proposed requirement in paragraph 21(a) on GHG emissions, including disclosure of GHG emissions intensity, disclosure of GHG emissions by its constituent gases, disclosure of market-based and location-based Scope 2 GHG emissions and relief for the disclosure of Scope 3 GHG emissions
  • The proposed industry-based requirements in Appendix B of [draft] S2, including the scope of changes to the content in Appendix B as part of finalising [draft] S2 and the draft plan to further develop the content in Appendix B in the future
  • The proposed requirements on financed and facilitated emissions, including the location and status of the requirements and the technical content of the requirements

Greenhouse gas emissions (Agenda Paper 4A)

In its October meeting, in relation to the proposed requirements on the disclosure of Scope 1 and Scope 2 GHG emissions, the ISSB tentatively decided to proceed with the proposed requirements for an entity to disclose:

  • Its absolute gross GHG emissions generated during the reporting period, expressed as metric tonnes of CO2e, for its Scope 1 and Scope 2 GHG emissions
  • The approach it used to include its Scope 1 and Scope 2 GHG emissions for the unconsolidated investees (ie associates, joint ventures, unconsolidated subsidiaries or affiliates not included in paragraph 21(a)(iii)(1) of [draft] S2
  • The reason, or reasons, for the entity’s choice of approach required by paragraph 21(a)(iv) of [draft] S2, and how that relates to the disclosure objective in paragraph 19 of [draft] S2

Furthermore, the ISSB decided to proceed with, but clarify, the proposed requirements for an entity to disclose its Scope 1 and Scope 2 GHG emissions disaggregated by:

  • The consolidated accounting group (i.e. the entity’s parent and its subsidiaries)
  • The unconsolidated investees

At this meeting, the ISSB’s discussions built upon its previous redeliberations and its discussions focussed on additional recommendations that would address specific feedback received during the comment period.

Staff recommendation

The staff recommended that the ISSB:

  • Remove the proposed requirement to disclose emissions intensity from paragraph 21(a)(ii) of [draft] S2
  • Confirm that disclosure of GHG emissions is not explicitly required to be disaggregated by constituent gases
  • Introduce a requirement for entities to use Global Warming Potential (GWP) values based on the latest Intergovernmental Panel on Climate Change (IPCC) assessment
  • Introduce a requirement for entities to disclose information that enables users of general purpose financial reporting to understand the inputs, assumptions and estimation techniques an entity has used to measure its GHG emissions and why these inputs, assumptions and estimation techniques are relevant to its GHG emissions. As part of this, the staff recommended that the ISSB require an entity to also disclose information about changes in the estimation techniques or significant assumptions made during the reporting period
  • Clarify that entities are required to disclose their Scope 2 GHG emissions based on both a market-based and location-based approach

ISSB discussion

The ISSB first discussed the staff recommendations to remove the proposed requirement to disclose GHG emissions intensity and confirming not providing any explicit requirement to disaggregate GHG emissions by constituent gases. ISSB members’ reactions to the staff recommendation to remove the requirement to disclose GHG emissions intensity were mixed.

One ISSB member observed that not providing information on GHG emissions intensity does not take away users’ ability to calculate the emissions intensity on their own. They could still do so by using the information publicly available elsewhere or obtaining the information from a third-party data providers. Another ISSB member, however, commented that users’ ability to obtain an entity’s GHG emission by either of the ways mentioned above does not justify removing the proposed requirement. He was concerned that it may set an unwanted precedent in other cases.

A few ISSB members observed that if an entity is managing to an intensity metric different from what users choose to use, then that difference in itself should be useful information to users. One of them said that it would not seem onerous for an entity to disclose GHG emissions intensity.

Showing support for the staff recommendation because of no common denominator suitable for all situations, one ISSB member suggested that voluntarily providing information about GHG emissions intensity would not obscure required disclosure. She noted that such disclosure might be material for an entity and might also even be necessary to meet jurisdictional requirement.

A few ISSB members said that if the ISSB were to require disclosure of GHG emissions intensity, it would also have to prescribe how to calculate emissions intensity (i.e. prescribing the numerator and the denominator). They commented that this would be difficult because the relevance of the denominator would be different depending on industries. Another ISSB observed that disclosure of particular ratio is rarely required for financial reporting. He said that earning per share (EPS) information is one example but the information on emissions intensity is different from EPS information in that it would be difficult to specify a particular denominator for emissions intensity.

One ISSB member suggested that the if the ISSB decides to remove the proposed requirement to disclose emissions intensity, it should be careful not to give a wrong impression that information about emissions intensity is not important.

With respect to the staff recommendation to disaggregation, ISSB members were generally supportive of the recommendation.

Some ISSB members observed that whether disaggregation is explicitly required in this respect should not result in a different outcome. This is because information would be disaggregatd if material even when not explicitly required and information would be aggregated even when disaggregation is explicitly required if disaggregated information would be immaterial. One of them commented that he would prefer requiring disclosure unless immaterial, which he said would lead to better disclosure overall.

Agreeing that explicitly requiring or not would lead to the same outcome, one of the Vice-Chairs supported the staff recommendation because information would be typically aggregated and it would be for particular industries and circumstances in which disaggregated information would be material.

One of the ISSB members commented that requiring disaggregated information by constituent gases might not lead to the best way to use company resources to convey information. He also noted that the ISSB should provide standardised guidance around when certain types of disaggregation are likely to be helpful. He further noted that such guidance can relate to business activities more than to the whole entity level.

One of the Vice Chairs expressed preferrence not to provide a cross reference to the guidance in [draft] S1 on aggregation/disaggregation because of the risk of unintended consequences.

The ISSB then discussed the staff recommendation to require use of both a location-based and market-based approach in measuring Scope 2 GHG emissions.

Noting that there was not much feedback from respondents to [draft] S2 requesting both approaches to be used in measuring Scope 2 GHG emissions, a few ISSB members said they were surprised by this staff recommendation. One of them observed that she would not see them as two different approaches but that she would see them as two different inputs that result in two different answers to two different questions. She said that requiring disclosure of Scope 2 GHG emissions based on two approaches may create confusions for users. She and other ISSB members, including the Chair, said that the location-based approach is more widely used.

One of the Vice-Chairs asked the staff why the staff recommended use of both approaches instead of requiring the location-based approach while being silent on or allowing the provision of the market-based information as an extra piece of information. The staff explained that some respondents to [draft] S2 had suggested use of both approaches, which was a starting point for the staff recommendation. The staff further explained that information based on the location-based and market-based approach would provide indicators of different types of transition risks and that its relationship was similar to the relationship between the disclosure of the gross GHG emissions and carbon offsets, the latter being a means to mitigate climate-related risks.

Many ISSB members suggested that an entity should be able to explain what mechanisms it uses to manage its emissions, but that it should not go so far as requiring the entity to disclose Scope 2 GHG emissions based on a market-based approach as well.

There was little discussion relating to the rest of the staff recommendations, but the staff clarified that the GWP values in the latest assessment by the IPCC which the staff recommended requiring an entity to use are the ones based on a 100-year time horizon.

ISSB decision

9 of 14 ISSB members agreed with the staff recommendation to remove the proposed requirement to disclose GHG emissions intensity.

12 of 14 ISSB members agreed with the staff recommendation to confirm that [draft] S2 include no explicit requirement to disaggregate disclosure of GHG emissions by constituent gases.

13 of 14 ISSB members agreed to amend the requirement in [draft] S2 so that in disclosing its Scope 2 GHG emissions, an entity would be required to use the location-based method along with relevant information about contractual instruments related to managing energy it has purchased.

All ISSB members agreed with the staff recommendations relating to introducing a requirement for an entity to (1) use the GWP values in the latest assessment by the IPCC, based on a 100-year time horizon and (2) disclose information that would enable users of general purpose financial reporting to understand how and why the entity has used specific inputs, assumptions and estimation techniques to measure its GHG emissions, along with any changes in the estimation techniques it uses and changes in significant assumptions it makes during the reporting period.

Scope 3 greenhouse gas emissions (Agenda Paper 4B)

In its October meeting, the ISSB began its redeliberations on the proposed requirements relating to Scope 3 GHG emissions and tentatively decided:

  • To proceed with its proposal to require an entity to disclose its Scope 3 GHG emissions (when material), subject to relief that would address the data availability and data quality challenges raised by respondents in the consultation
  • To confirm that such a disclosure would include information about which of the 15 Scope 3 GHG emissions categories described in the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (GHG Protocol Value Chain Standard) are included within the entity’s measure of Scope 3 GHG emissions
  • That relief would be provided with the publication of IFRS S2 to assist with data availability and data quality challenges associated with Scope 3 GHG emissions

Furthermore, at that meeting, the ISSB asked the staff to provide an analysis on whether an entity should be exempt from the disclosure described in the second item above if the entity is not using the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (the GHG Protocol Corporate Standard), which was subject to decision-making discussions by the ISSB at this meeting.

At this meeting, the ISSB also continued redeliberating reliefs to address the data availability and data quality challenges raised by respondents in the consultation.

Staff recommendation

The staff recommended that the ISSB:

  • Introduce reliefs for Scope 3 GHG emissions disclosures. Specifically:
    • A temporary exemption from the proposed requirement to disclose Scope 3 GHG emissions for a minimum of one year following the effective date of IFRS S2
    • Relief so that an entity’s measurement of Scope 3 GHG emissions can include GHG emissions information that is not aligned with its reporting period when the GHG emission information is obtained from entities in its value chain with a reporting cycle that is not aligned to that of the preparer, subject to specific conditions
  • Introduce a framework for how an entity measures its Scope 3 GHG emissions, with accompanying requirements for an entity to disclose information that enables users of general purpose financial reporting to understand how the entity measured its Scope 3 GHG emissions
  • Introduce relief related to an entity’s value chain. Specifically:
    • Implementation (‘non-mandatory’) guidance to support an entity in assessing which sustainability-related risks and opportunities in the value chain are relevant to users of general purpose financial reporting, using Scope 3 GHG emissions as an example
    • Require an entity to reassess the ‘scope’ of its sustainability-related risks and opportunities in its value chain only upon the occurrence of either a significant event or a significant change in circumstances
  • Confirm that no additional relief would be provided regarding the proposal that an entity is required to include information about which of the 15 Scope 3 GHG emissions categories described in the GHG Protocol Value Chain Standard are included within the entity’s measure of Scope 3 GHG emissions

ISSB discussion

The ISSB first discussed the staff recommendations for reliefs relating to the temporary exemption from providing Scope 3 GHG emissions disclosure, difference in reporting period and an entity’s value chain (ie provision of non-mandatory implementation guidance and reassessment of the scope of the entity’s value chain). ISSB members were generally supportive of these recommendations.

The Chair shared that he had not received any questions from members of the jurisdictional working group about this topic whereas the feedback to the [draft] S2 showed a lot of concerns regarding Scope 3 GHG emissions disclsoure requirement. He said this shows the progress and the improvement that the ISSB has made since the publication of the [draft] S2.

One ISSB member expressed disagreement with the staff proposal to provide a temporary exemption from disclosing Scope 3 GHG emissions for a minimum of one year. He suggested that other reliefs that the ISSB had already tentatively decided to provide relating to Scope 3 GHG emissions were sufficient. He said this additional relief could discourage entities from providing important informatio (i.e. Scope 3 GHG emissions). He and another ISSB member also expressed concerns that with this exemption, the timing in which entities would start providing Scope 3 GHG emissions would be very late, which could be 2026 or 2027, considering the target year of 2030 of Sustainable Development Goals.

Acknowledging the concern described above, another ISSB member expressed support for the staff recommendation because data quality of Scope 3 GHG emissions information that entities would rush to provide may not be good and that information with better quality even at later timing could be beneficial to users in their decision making.

One of the Vice-Chairs and another ISSB member said that it would be better to consider whether to provide a temporary exemption together with the length of such an exemption’s availability. Referring to one year exemption similarly suggested by the U.S. climate-related standard and provided by the New Zealand climated-related standards, the ISSB member said that the length of the availability could be different depending on countries, especially those for countries in the global south. The Vice Chair also said that the temporary exemption, if the ISSB decided to provide, should be able to accommodate different stages of jurisdictions’ readiness.

One of the Vice-Chairs expressed support for the staff recommendation for the relief relating to an alignment of reporting periods between the reporting entity and entities in its value chain. However, she made points about two of the three condisions suggested by the staff. The first condition she made points about was the one requiring the length of the reporting periods and any difference between the ends of the reporting periods to be the same from period to period. She suggested that considering there could be many entities in an entity’s value chain, it would be too much to require any difference between the ends of the reporting periods to be the same from period to period.

The second condition she referred to was the one relating to adjusting for the effects of significant events and changes in circumstances that occur between the reporting date of the reporting entity and that of entities in its value chain. She asked whether this condition would require an entity to recalculate the amount if there is significant event or it would be enough only to explain such an event.

One ISSB member expressed a concern about the staff recommendation relating to the alignment of the reporting dates, pointing to an inconsistency of the treatment suggested here and the treatment specified in IFRS Accounting Standards. In certain circumstances, IFRS 10 and IAS 28 allow a reporting entity to have a different reporting date from its subsidiaries/associates as long as the difference does not exceed three months. He noted, however, that the relief suggested by the staff relate only to Scope 3 GHG emissions and does not extend to Scope 1 and Scope 2 GHG emissions.

One of the Vice-Chairs commented that while preparers may not have focussed on potentially having to reassess the scope of entities in their value chain, the relief suggested by staff about reassessment of the scope would be a very practical relief. She also noted that the draft European Sustainaiblity Reporting Standards (ESRS) have a variance of something similar to address a similar issue.

The ISSB then discussed the staff recommendation relating to introducing a framework for measuring Scope 3 GHG emissions, along with accompanying disclosure requirements to this framework. There was a general support from the ISSB members to introduce a framework for measuring Scope 3 GHG emissions, as described in Agenda Paper 4B. The ISSB’s discussion on this topic focussed on the notion of impracticability and whether such a mechanisism is necessary.

Observing the staff recommendation would require an entity to disclose how the entity is managing (how it is ‘thinking about’) its Scope 3 GHG emissions if the entity determines it is impracticable to estimate them, one ISSB member questioned how such a disclosure could provide information useful for decision making. She suggested the ISSB should think through the right words for the requirement, if the ISSB decided to require this, because ‘how an entity is managing’ does not capture the activity the entity might be doing or how the entity is thinking about it.

Noting that the framework suggested by the staff does not mandate direct measurement of Scope 3 GHG emissions and that estimation approaches are acceptable, one of the Vice-Chairs asked why there would be a situation in which it would be impracticable for an entity to measure its Scope 3 GHG emissions. The staff responded by saying that the notion of impractibility is a very high hurdle and thus, they would not expect this to be used very often but that there could still be circumstances in which it actually is impracticable for an entity to measure its Scope 3 GHG emissions. The Vice-Chair expressed concerns about introducing the impracticability provision. One concern was that while it is well understood in the accounting world that the impracticability presents a very high hurdle, it may not be the case for sustainability reporting, which is new. Another concern was a signaling this could give to stakeholders. While the ISSB is trying to encourage preparers and jurisdictions to provide information of Scope 3 GHG emissions by accepting estimates for them, there is a risk that preparers might start to look for reasons why it is impracticable, which is an opposite type of bahaviour the ISSB is trying to encourage.

One ISSB member suggested that similar disclsoure that would be required if the entity determines it is impracticable to estimate Scope 3 GHG emission could also be required during a period in which an entity applies the temporary exemption from disclosing Scope 3 GHG emissions. The Chair commented that with the earlier decision to provide the temporary exemption from disclsoing Scope 3 GHG emissions it would be too much to provide the impracticability provision and therefore, he would not support this aspect of the recommendation.

IASB decision

13 of 14 ISSB members agreed with the staff recommendation to provide the temporary exemption from providing Scope 3 GHG emissions disclosure.

All ISSB members agreed with the staff recommendations relating to provision of non-mandatory implementation guidance and reassessment of the scope of the entity’s value chain.

All ISSB members also agreed with the modified version of the staff recommendation for the relief relating to difference in reporting period between the reporting entity and entities in its value chain. The modifiation related to one of the conditions attached to the use of the relief, which is the length of the reporting periods and any difference having to be the same from period to period (ie removed from the staff suggestion the condition of any difference between the ends of the reporting periods having to be the same).

The ISSB then voted on introducing a framework for measuing Scope 3 GHG emissions, as described in paragraphs 48 and 50 in Agenda Paper 4B. All ISSB members agreed with the staff recommendation.

Then, the ISSB voted on introducing additional disclosures that come with the framework. All ISSB members agreed with the staff recommendation to require an entity to disclose the extent of the Scope 3 GHG emissions disclosure estimated using inputs (1) from specific activities in the entity’s value chain (‘primary data’) and (2) that are verified.

12 of the ISSB members agreed with the staff recommendation to require an entity to disclose how the entity is managing (how it is ‘thinking about’) its Scope 3 GHG emissions if the entity determines it is impracticable to estimate its Scope 3 GHG emissions.

All ISSB members agreed with the staff recommendation that all entities should be required to include information about which of the 15 Scope 3 GHG emissions categories described in the GHG Protocol Value Chain Standard are included within the entity’s measure of Scope 3 GHG emissions.

Appendix B (Agenda Paper 4C)

At its October meeting, the ISSB discussed industry-based materials, including the industry-based requirements set out in Appendix B to [draft] S2. The ISSB also tentatively agreed to:

  • Maintain the requirement that entities provide industry-specific disclosures
  • Classify the content in Appendix B as illustrative examples, while stating an intention to make Appendix B required in the future, subject to further consultation

The paper built on these decisions, with the objectives of:

  • Presenting a recommendation regarding how the October decisions would be reflected in the Standard
  • Presenting staff recommendations and seeking decisions from the ISSB regarding the scope of changes to content in Appendix B as part of its finalisation of S2
  • Presenting and seeking the ISSB’s feedback on staff’s draft plan to further develop the content in Appendix B and transition it into a body of industry-based requirements associated with S2 in the future

Staff recommendation

The staff recommended that the ISSB amend the proposed requirements in [draft] S2 that make reference to Appendix B to reflect the updated status of the content.

Separately, the staff also recommended that the ISSB approve the following objectives for making enhancements to Appendix B as part of the finalisation of S2:

  • (a) Responding to stakeholder feedback regarding the international applicability of particular disclosure topics and metrics
  • (b) Addressing unintended inconsistencies identified:
    • (i) Between Appendix B and the SASB Standards
    • (ii) Between multiples instances of a particular metric used in different industry contexts within Appendix B
    • (iii) Between Appendix B and IAS 16
  • (c) Addressing corrections of scope identified

ISSB discussion

ISSB members considered the paper the staff had prepared very helpful and was very supportive on the staff’s recommendations since they are consistent to [draft] S1 and reflect the two decisions for industry-based materials in October 2022. The ISSB agreed to maintain the requirement in [draft] S2 that entities provide industry-specific disclosures and to classify the content in Appendix B as illustrative examples.

Parts of the discussion focused on the question as to whether two metrics in Volume B11 of Appendix B (Oil & Gas – Exploration & Production) should be aligned with IAS 16 Property, Plant and Equipment (EM-EP-420a.1 and EM-EP-420a.2 – distinguish between proved and probable reserves). The ISSB decided not to change the metrics for proven and probable reserves and have a more thorough debate of how the ISSB will address the differences when Appendix B will be subject to discussion.

For the rest of the paper, no decisions were made. Instead, ISSB members were asked on what the staff should consider when advancing Appendix B as a required part of S2.

One ISSB member emphasised to be cautious when streamlining different SASB metrics. For some of the staff’s recommendations this could lead to less granular metrics (changed total fresh water withdrawn to total water withdrawn), while for other metrics changes seem to be more granular (metrics for the Apparel, Accessories & Footwear industry). Hence, the ISSB member suggested that changes should be consistent with quality and availability of resources.

In general, ISSB members were supportive of the staff’s five phases for transitioning Appendix B into industry-based requirements. Based on those phases, the staff was asked to use the wider stakeholder body to gain more insights on the type of industry-specific information. Therefore, one ISSB Co-Chair additionally recommended analysing the comment letters and getting in contact with those that disagreed with industry-specific requirements to understand their perspective.

Financed and facilitated emissions (Agenda Paper 4D)

This paper continued the ISSB’s redeliberations of financed and facilitated emissions. The proposed disclosure requirements for financed and facilitated emissions were set out in Volumes 15-18 of Appendix B to [draft] S2. This builton the September 2022 agenda paper on financed and facilitated Emissions, which identified matters raised in stakeholder feedback for further consideration.

The staff noted that the proposals discussed, and the recommendations made in this paper should be considered in the light of related proposals and recommendations discussed under Agenda Paper 4B and Agenda Paper 4C above.

The objective of this paper was:

  • To describe the staff’s research and analysis of the matters raised in stakeholder feedback
  • To provide staff recommendations to the ISSB about whether and how to address these matters

Staff recommendation

The staff recommendations relate to two aspects of the proposed requirements for financed and facilitated emissions:

  • The location and status of the requirements
  • The technical content of the requirements

First, with respect to the location and status of the requirements, the staff recommended that the ISSB:

  • Confirm the proposed disclosure requirements for financed emissions. More specifically, to issue financed emissions disclosure requirements for three industries—Asset Management & Custody Activities, Commercial Banks and Insurance (subject to recommended amendments discussed later in this paper) and to make these disclosure requirements part of the required disclosures in S2 associated with the disclosure of Scope 3 GHG emissions, Category 15. Thus, these disclosure requirements for financed emissions would be within the ‘main body’ of S2, that is, included within the (required) application guidance rather than being part of Appendix B, which the ISSB has decided will initially not be required
  • Remove the proposed disclosure requirements for facilitated emissions for the Investment Banking & Brokerage industry. Thus, these disclosures would not be included in S2, i.e. neither the main body of S2 nor in Appendix B

With respect to technical content, the staff recommended that the ISSB confirm the proposed requirements for the disclosure of financed emissions for the three industries described above, with targeted amendments. More specifically, the staff recommended that the ISSB confirm the following proposals for financed emissions, including:

  • The use of the term ‘financed emissions’ in all three industries
  • The requirement to aggregate disclosures at the total assets under management (AUM) level for the Asset Management & Custody Activities industry
  • The requirements for an entity to describe its methodology for calculating financed emissions in all three industries
  • The requirements for an entity to disclose the emissions intensity of its financed emissions per unit of physical or economic activity
  • The use of the Global Industry Classification System (GICS) as the classification system for industry-based disclosure of financed emissions

The staff also recommended that the ISSB confirm, but clarify:

  • The proposed requirements for undrawn loan commitments for the Commercial Banks and Insurance industries, which would require separate disclosure of both the financial exposures and emissions related to the commitments (as opposed to reporting one combined value)
  • The proposed requirement that the Commercial Banks industry provide disclosure on a gross basis, that is, without consideration of risk mitigants

The staff also recommended targeted amendments to remove:

  • All references to, and requirements to disaggregate disclosure by, ‘carbon-related industries’
  • Derivatives from the calculation of financed emissions

Finally, the staff noted the following areas to monitor for market developments, which may become areas of future consideration:

  • Facilitated emissions for the Investment Banking & Brokerage industry
  • ‘Associated’ emissions for the Insurance industry
  • Emerging methodologies for financed emissions calculations for asset classes including derivatives
  • Guidance/standardisation of emissions-intensity denominators (for example, industry-based)

ISSB discussions

With respect to the location, the discussions focused on the fact that the location of the disclosures for financed and facilitated emissions would impact their status and would influence the consistency of their application. Including financed emissions disclosures as part of the required disclosures of Scope 3 GHG emissions, Category 15 for the Asset Management & Custody Activities, Commercial Banks, and Insurance industries in S2 would make disclosures required if material and therefore increase comparability, because it uses defined metrics and does not allow to select only entity-specific disclosures. Therefore, the ISSB followed the staff’s recommendations and decided that these disclosures should be included within S2 (as application guidance) rather than being retained in Appendix B as was proposed in [draft] S2. With respect to the status of the requirements, the ISSB decided to remove the proposed requirements for the disclosure of facilitated emissions for the Investment Banking & Brokerage industry—i.e. that no specific disclosures about facilitated emissions would be included for this industry. Both decisions were made with a strong majority.

With respect to the technical content of the requirements, ISSB members agreed with the staff’s recommendation to use the term “financed emissions” in all three industries (Asset Management & Custody Activities, Commercial Banks and Insurance). The discussions relating to the staff’s recommendation to aggregate disclosure at the total assets under management (AUM) level for entities in the Asset Management & Custody Activities industry highlighted the need to be more precise on the definition of AUM and on the question as to when also disaggregated information should be disclosed. Based on this discussion, ISSB members were not only asked whether they agree with the requirement to aggregate disclosures at the total AUM level for entities in the Asset Management & Custody Activities industry, but also whether it should be emphasised in the application guidance of the Standard that disaggregation is required if aggregation would obscure the disclosure of relevant information. ISSB members agreed with this. Furthermore, the ISSB members decided that the total AUM level should be explicitly defined and disclosed by each company. ISSB members also confirmed the requirement for an entity to describe its methodology for calculating financed emissions in all three industries and the use of the Global Industry Classification System (GICS) as the classification system for industry-based disclosure of financed emissions. Following an intense discussion on the emissions intensity of an entity’s financed emissions, the ISSB did not follow the staff’s recommendation and decided not to require an entity to disclose the emissions intensity of its financed emissions per unit of physical or economic activity.

Furthermore, the ISSB confirmed the proposals that set out an entity’s approach to undrawn loan commitments, which would specify separate disclosure of both exposure and emissions, and the disclosure of financed emissions by Commercial Banks, explicitly requiring disclosure on a gross basis, excluding the effect of risk mitigants.

In addition, the ISSB agreed with the staff’s recommendations to make targeted amendments to remove all references to, and requirements to, disaggregate disclosure by, ‘carbon-related industries’ and derivatives from inclusion in the required calculation of financed emissions.

For the last staff recommendations, no vote was made. Nevertheless, ISSB members supported the list of areas of practice, and highlighted the need to prioritise correctly and to ensure that disclosures become more targeted. In addition, the Chair raised the aspect of interoperability with the green taxonomy for the finance industry.

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