Climate-related Disclosures — Summary of Comments

Date recorded:

Summary of comments (Agenda Paper 4A)

The comment period for the Exposure Draft (ED) IFRS S2 Climate-related Disclosure ended on 29 July 2022. The ISSB received comment letters and survey responses from nearly 700 respondents on the ED.

This paper summarised the feedback received from these respondents by each question included in the ED.

Key themes the staff has identified arising from the feedback are:

  • Robust stakeholder response—The stakeholder response to the ED was robust in terms of the volume (nearly 700) and the diversity of the respondents. The respondents represented a range of stakeholder types and geographies. The strong response rate suggests significant and widespread interest across the global capital markets in IFRS S2. While preparers of climate-related financial disclosure represented the single largest stakeholder type that provided feedback, the number of responses from users of general purpose financial reporting was high relative to commonly observed response rates to consultations from other standard-setters
  • Broad support for the proposals—The proposals in the ED were generally well-received, in particular by users of general purpose financial reporting, who expressed strong agreement with the proposed objective and the specific proposals. While there was broad support for IFRS S2, many respondents also asked for greater support, guidance and examples to enable effective application of the proposals
  • Mixed views on certain aspects of the proposals—Most respondents agreed that most of the proposals would result in disclosures that enable users of general purpose financial reporting to assess the effects of climate-related risks and opportunities on an entity’s enterprise value. While almost all respondents agreed with the proposals on governance, strategy, risks management and the cross-industry metric categories and targets, views were mixed on specific proposals, including those relating to Scope 3 greenhouse gas emissions, the use of scenario analysis and the industry-based requirements
  • Emphasis on the scalability of the proposals—While respondents generally expressed agreement with most of the proposals, most respondents also raised concerns about the range of capabilities and preparedness of entities around the world to apply some of the proposals in the ED. Most respondents noted that some disclosures will require significant resources, both in a transition phase and on an ongoing basis and also that there was a need for more illustrative examples and guidance on specific requirements to aid application

ISSB discussion

One ISSB member commented that sometimes interpreting comments could be difficult but it would be very good if the staff and the ISSB could understand whether the feedback received relate to a concern for items that would not apply to an entity (e.g. because it is not material) versus a concern related to the aspects of the standards that would apply to an entity, which he said was a huge differentiation in terms of redeliberations.

Noting a few respondents had suggested that Appendix B should be non-mandatory requirements due to concerns that respondents may have had insufficient time to engage with the material given the volume, he asked the staff how comfortable they were with the quality of feedback on Appendix B. The staff replied with caution that this point alone would not necessarily mean that the quality of feedback on Appendix B was not good.

One ISSB member asked the staff whether for both preparers and users the staff had a sense of experiences those had with TCFD and whether there was any learning from that. The staff replied that while it was difficult to give an overview in that respect, it was clear that the fact the proposals were built on TCFD was highly valued, which also affected the responses to an effective date. The staff also said that financial industries, especially large financial services firms and large firms in developed parts of the world have more experiences with TCFD.

With respect to industry-based metrics, while noting that there was mixed feedback on the proposals relating to these metrics, the Vice-Chair asked whether there was a support for the concept of industry-specific disclosures itself. She suggested that as the ISSB moves forward with redeliberations of this topic, it would be very important to understand whether it is the concept of industry-specific disclosures that stakeholders disagree with, or the content of Appendix B to IFRS S2. She also observed that the feedback on this matter was different depending on jurisdictions. The staff replied that there was broad support for the concept and the mixed feedback was on specific implementation of the concept in the Appendix B to IFRS S2. The staff also agreed with the Vice-Chair’s observation and commented that mixed feedback had been received from the Asia-Oceania regions, including Japan, China and Australia.

One ISSB member asked whether the statement that “only some investors agreed” with the proposed disclosure relating to financed emissions associated with total asset under management meant that many other investors disagreed with such proposals or it was simply that most investor respondents had not commented on it. Another ISSB member asked whether the investors mentioned represented users of information or preparers of sustainability-related disclosure. The staff replied to the first question that the comment summary was based on the responses that had answered particular questions so it is not to say that many investors disagreed with the proposals. As for the second question, the staff suggested the staff would look at more granular breakdown during a redeliberation phase.

With respect to cost-benefit aspects of the proposals, one ISSB member observed that the feedback summarised in this aspect did not seem specific to the proposals in IFRS S2. The staff said that its observations were consistent, except for the feedback to the effect that IFRS S2 implementations would reduce the risk that fragmented jurisdictional disclosure requirements will increase complexity for preparers and users of information.

Another ISSB member asked the staff what the banking sector represented, which was mentioned in the context of respondents who commented that IFRS S2 would entail substantial costs and investments for banks. He also asked whether the comment that costs associated with industry-based requirements would be significant was due to the proposals added to the SASB requirements (i.e. financed and facilitated emissions). The staff replied that the banking sector in this case represented lenders rather than the financial sector more broadly and to the second question that that could be a reason.

On the question relating to verifiability, the Vice-Chair noted that some respondents had said that proposed requirements relating to scenario analysis and anticipated effects of climate-related risks and opportunities could be difficult to verify because of their prospective nature and levels of uncertainty. She commented that such feedback could be interpreted as relating to assurances of whether information provided is correct but that that was not what was meant here so she suggested that the ISSB should keep that in mind during redeliberations.

No decisions were made at this meeting.

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