General Sustainability-related Disclosures and Climate-related Disclosures

Date recorded:

Interoperability—key matters (Agenda Paper 3C & 4D)

Many respondents noted the importance of achieving interoperability with the proposals published in Europe and the US in developing a global baseline of sustainability-related financial disclosures. Many respondents also pointed to key differences in concepts, terminologies, and definitions between the ISSB’s proposals and jurisdictional initiatives, including EFRAG’s and the US SEC’s proposals. At this meeting, the ISSB was asked to make some decisions in areas where further related deliberations will be considered at subsequent meetings.

The staff recommended that the ISSB:

  • In relation to overarching matters:
    • Confirm the use of the TCFD pillars for structuring the core content in IFRS S1 and IFRS S2—that is, information will be required on governance, strategy, risk management and metrics and targets
    • Confirm the meaning of the global baseline–in particular that disclosures are designed to meet the information needs of investors, creditors and other lenders, information provided is subject to an assessment of materiality and that the information required by IFRS Sustainability Disclosure Standards can be presented with information disclosed to meet other requirements, such as that required by regulation, but cannot be obscured by that additional information
  • In relation to matters related to IFRS S1:
    • (As set out in Agenda Paper 3B) confirm that information is being provided to meet the information needs of the primary users of general purpose financial reporting as proposed in IFRS S1
    • (As set out in Agenda Paper 3B) remove the definition of enterprise value that was included in IFRS S1 and remove the words “to assess enterprise value” from the IFRS S1 objective and definition of materiality
    • Confirm that, consistent with IFRS S1 and IFRS S2, time horizons are not defined for short, medium and long term–which should be based on entity-specific assessments
    • Confirm the definition of “value chain” that was proposed in IFRS S1
  • In relation to matters related to IFRS S2:
    • In relation to current effects:
      • Consistent with paragraph 14 of IFRS S2, confirm that disclosures be required about the effects of climate-related risks and opportunities on the entity’s financial position, financial performance and cash flows for the reporting period (ie the current effects)
      • Consistent with IFRS S2, confirm that disclosures are not required to be reported separately for physical risks, transition risks and climate-related opportunities
      • Confirm that separate disclosures be required about assets subject to physical and transition risks and climate-related opportunities, in the form of metrics
    • (As set out in Agenda Paper 4C) confirm the use of the Greenhouse Gas Protocol Corporate Standard (GHG Protocol Standard) to measure GHG emissions (subject to proposed reliefs)
    • (As set out in Agenda Paper 4B) confirm the requirement to disclose Scope 3 emissions (subject to proposed reliefs to address practical challenges)
    • (As set out in Agenda Paper 4B) confirm the granularity/number of categories of Scope 3 GHG emissions—in particular, confirm the use of the 15 categories from the GHG Protocol Standard
    • Confirm the disclosures proposed in paragraph 15(a) of IFRS S2—that is, that an entity is required to disclose the results of its analysis of climate resilience and the particular information set out in that paragraph
    • Confirm the disclosures in IFRS S2 that describe how the climate resilience analysis has been conducted
    • Confirm the disclosure requirement proposed in IFRS S2 that an entity disclose whether it has used, among its scenarios, a scenario aligned with the latest international agreement on climate change. This confirms that:
      • The language on the latest international agreement on climate change (i.e. the Paris Agreement is not “hard coded” into the requirements)
      • That entities are not required to use a specific scenario related to the latest international agreement on climate change or a 1.5C° scenario
    • Add a requirement to disclose whether and how an entity uses climate-related scenario analysis to inform the identification of climate-related risks and opportunities
    • Confirm the requirement to disclose the intended use of carbon credits. However, the staff recommends that the ISSB clarify that an entity's net emissions target(s) and intended use of carbon credits should be disclosed separately from the entity’s gross emission reduction target(s)
    • Use the term “carbon credit” instead of “carbon offset”
    • Clarify the different types of targets—in particular, that a climate-related target is set by an entity to address aspects of its climate-related risks and opportunities and the role of emissions targets in transitioning to a low-carbon economy
    • Clarify that an entity is required to disclose any emissions targets it has set (both net emission targets and gross emissions reduction targets) and those it is required to meet by national or regional legislation

ISSB discussion

In relation to overarching matters, all ISSB members agreed with the staff recommendations.

In relation to matters related to IFRS S1, the first two and last matters were discussed in the previous session (see meeting notes of Agenda Paper 3B) and therefore the ISSB members focused on the time horizons at this meeting. Although ESRS currently defined short and medium term as 12 months, and medium and long term as a specific timeframe, it is possible for reporting entities to have different time horizons based on their own circumstances. All ISSB members agreed that time horizons should not be defined and should be based on entity-specific assessments.

In relation to matters related to IFRS S2, matters in relation to GHG emissions were discussed in the previous session (see meeting notes of Agenda Paper 4B) and all ISSB members agreed with the staff recommendations for the remaining matters. One of the Vice Chairs confirmed that guidance will be provided in the future for the additional disclosure requirement on how an entity uses climate-related scenario analysis to inform the identification of climate-related risks and opportunities and also for the entire climate resilience section. ISSB members emphasised the importance of a clear definition in relation to carbon credit, highlighted the different possible sources for carbon credit, including carbon trade and carbon offset, and considered it necessary for reporting entities to disclose such different sources.

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