Since 1 October 2021, new regulations came into effect for trustees to improve the quality of governance and reporting with respect to climate change risks and opportunities for Occupational pension schemes.  The regulations require trustees to identify, assess, and manage climate-related risks and opportunities and report on what they have done.  

The TPR review was based on 30 reports with scheme year-end dates between 1 October 2022 and 30 September 2023 covering defined benefit, hybrid, single-employer DC schemes and a DC master trust.  The review considered:

• quality and consistency of reporting against the Climate and Governance Regulations and the Department for Work and Pension's (DWP's) statutory guidance.
• whether trustees had considered the issues TPR raised in its 2023 statement on climate-related disclosures.
• how well trustees understood the range of climate-related risks and opportunities for their scheme, and explained the results of their analysis.
• how trustees intend to address the risks and opportunities they have identified, proportionate to the scheme's circumstances and other risk exposures.

The key observations from the reports reviewed which the TPR expects trustees to consider were:

• Context.  Information, such as scheme size, structure of DB sections, DC popular default funds and funding level is most helpful when reported early in the report to help put the rest of the report into context for readers.
• Materiality.  Where reports refer to specific investment mandates, it is helpful to explain their size in relation to total scheme assets to help the reader understand the materiality of the issue.
• Generic wording.  A number of the reports reviewed contained generic wording.  The quality of reports can be improved by including specifics on policies, steps to manage risks and information received from advisers.
• Developments between reports.  Some trustees reporting in the second year of reporting reused some parts of the previous report.  TPR indicates that this is a sensible way of producing the report provided any legal requirements continue to be met.  However, where trustees take this approach, TPR expects them to supplement these elements with a summary of developments and activities during the year.
• Length.  A longer report does not correlate to better quality with better reports demonstrating how disclosure requirements had been addressed in a concise way.  
• Member summaries.  Some reports had excellent plain English summaries and that format allowed the remainder of the report to be written with a more informed/technical reader in mind.
• Action plans.  Where trustees have used the reporting process to identify additional work that needs to be carried out, they should set a plan for this, monitor progress and update on progress in their next report.

The review also found examples of trustee action on climate risk including:

• updating defined contribution default lifestyle strategies to include sustainable funds.
• increasing allocation to low carbon tracker funds. and/or to companies with 'high levels of green revenue'.
• exploring opportunities such as forestry, green bonds and/or committing funds to private market renewables.
• encouraging fund managers to engage with top carbon dioxide emitters.

In addition to the high level observations, the review also sets out specific findings in the areas of Governance, Strategy, Scenario analysis, Risk Management and Metrics and Targets with examples of better practice, areas of perceived weakness and ways to improve future reports.

The press release and the review can be found on the TPR website. 

The podcast high­lights some of the projects that were discussed during the meeting, including:

• Start of a thorough review concerning intangible assets
• Developments within the climate-related and other uncertainties in the financial statements project
• Finalisation of the agenda decision pertaining to net-zero commitments
• Insights into the ongoing post-implementation reviews of IFRS 15 and IFRS 9

The podcast can be accessed here on the IFRS Foun­da­tion website.

The following topics were discussed:

Post-implementation review (PIR) of IFRS 15 Revenue from Contracts with Customers: The IASB made decisions related to the interaction of IFRS 15 with other IFRS standards and on “determining the transaction price”.

Work plan: The IASB discussed a proposed prioritisation framework to help it consistently prioritise technical projects on its work plan. This is intended to balance capacity demand with supply and enable effective execution of the IASB’s mission. No decisions were made.

Rate-regulated activities: The IASB confirmed the proposals in the exposure draft Regulatory Assets and Regulatory Liabilities on the discount rate, the scope of the new standard in relation to IFRS 17 and consequential amendments to IFRS 3 and IFRS 5.

Maintenance and consistent application: IASB members confirmed that they do not object to two agenda decisions finalised by the IFRS Interpretations Committee and the staff presented the latest IFRIC Update.

Climate-related and other uncertainties in the financial statements: The ASB decided that IFRS Accounting Standards should provide illustrative examples of reporting climate-related and other uncertainties on the financial statements and gave permission to begin balloting the exposure draft for those examples.

Intangible assets: The IASB made the intangible assets project active. It also discussed the initial work the staff will undertake for this project.

Provisions—targeted improvements: The IASB decided to amend certain definitions in IAS 37 and to add requirements and application guidance to IAS 37.

PIR of IFRS 9—impairment: The IASB deliberated the feedback received in response to its request for information Post-implementation Review—IFRS 9 Financial Instruments—Impairment. The IASB decided to classify as low priority the matters relating to financial guarantee contracts and to consider these matters during the next agenda consultation. The IASB also decided to take no action on the matters that arise from applying the impairment requirements in IFRS 9 with the requirements for modification, derecognition and write-off of financial assets, the requirements for loan commitments, the requirements for purchased or originated credit-impaired financial assets, and the requirements in other IFRS standards.

Second comprehensive review of the IFRS for SMEs Accounting Standard: The IASB continued the redeliberations of its proposals in the exposure draft Third edition of the IFRS for SMEs Accounting Standard. The IASB made decisions on disclosure requirements on revenue. The IASB also decided to use plainer language in the new fair value section and to explore measuring intragroup financial guarantee contracts issued for nil consideration by applying the section on provisions and contingencies.

Updating the Subsidiaries without Public Accountability: Disclosures Standard: The IASB decided that the effective date of the amendments to IFRS 19 Subsidiaries without Public Accountability: Disclosures in the catch-up exposure draft (ED) should be 1 January 2027. The IASB also gave permission to ballot the catch-up ED.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

The ISSB Taxonomy will enable investors to search, extract and compare sustainability-related financial disclosures provided under the ISSB standards. The ISSB Taxonomy reflects IFRS S1, IFRS S2 and guidance accompanying the standards.

According to the press release, the ISSB Taxonomy has been developed to support the dialogue between entities and investors. It does not introduce new requirements nor does it affect an entity's compliance with the ISSB standards. Instead, the ISSB Taxonomy enables entities to consistently tag information prepared using ISSB standards.

The ISSB Taxonomy is consistent with the IFRS Accounting Taxonomy so that entities can provide a holistic digital financial reporting package to investors. However, the ISSB Taxonomy can also be used with other digital taxonomies.

Please click to access the ISSB Taxonomy via the press release on the IFRS Foundation website. 

Note: In a webinar released on 14 May 2024, ISSB Vice-Chair Sue Lloyd and ISSB staff member Tim Kasim introduce the ISSB Taxonomy, its key features, and its benefits for investors, companies and regulators. Please click here to access the webcast on the IFRS Foundation website.

Below is an analysis of all changes made to the work plan since our last analysis on 26 March 2024.

Stan­dard-set­ting projects

• Equity Method — An exposure draft is expected in Q3 2024 (previously H2 2024).
• Management Commentary — A decision on the project direction is now expected in June 2024 (previously Q2 2024).
• Primary Financial Statements — This project is removed from the work plan since the issuance of IFRS 18 Presentation and Disclosures in Financial Statements on 9 April.
• Second Comprehensive Review of the IFRS for SMEs Accounting Standard — The IFRS for SMEs Accounting Standard is now expected in H1 2025 (previously H2 2024).

Main­te­nance projects

• Addendum to the exposure draft 'Third edition of the IFRS for SMEs Accounting Standard'— Feedback on the exposure draft IASB/ED/2024/2 Addendum to the Exposure Draft 'Third edition of the IFRS for SMEsAccounting Standard' published on 28 March 2024 is expected to begin in Q3 2024.
• Annual improvements to IFRS Accounting Standards — The following now have the final amendment issued in July 2024 (previously Q3 2024):
  • Cost Method (Amendments to IAS 7)
  • Derecognition of Lease Liabilities (Amendments to IFRS 9)
  • Determination of a ‘De Facto Agent’ (Amendments to IFRS 10)
  • Disclosure of Deferred Difference between Fair Value and Transaction Price (Amendments to Guidance on implementing IFRS 7)
  • Gain or Loss on Derecognition (Amendments to IFRS 7)
  • Hedge Accounting by a First-time Adopter (Amendments to IFRS 1)
  • Introduction and Credit Risk Disclosures (Amendments to Guidance on implementing IFRS 7)
  • Transaction Price (Amendments to IFRS 9)
• Climate-related and Other Uncertainties in the Financial Statements — The next project step will now be an exposure draft expected to be published in Q3 2024.

Governance projects

• ISSB Consultation on Agenda Priorities — A feedback statement is now expected in June 2024 (previously Q2 2024).

Research projects

• Business Combinations under Common Control — This project has been removed from the work plan since the IASB completed it by publishing a project summary on 17 April 2024.
• Intangible Assets — This project has been added to the work plan and a review of the research is expected in H2 2024.
• Post-implementation Review of IFRS 15 — Revenue from Contracts with Customers — A feedback statement is now expected in Q3 2024 (previously H2 2024).

Other projects

• IFRS Accounting Taxonomy Update: The following projects were removed from work plan since the release of the update on 27 March:
  • Amendments to IAS 12, IAS 21, IAS 7 and IFRS 7
  • Common Practice (Financial Instruments) and General Improvements
• IFRS Accounting Taxonomy Update — Primary Financial Statements — A proposed IFRS Taxonomy Update is expected in May 2024 (previously Q2 2024)
• IFRS Accounting Taxonomy Update — Subsidiaries without Public Accountability: Disclosure and Amendments to IFRS 7 and IFRS 9 — A proposed IFRS Taxonomy Update is expected in Q3 2024 (previously H2 2024)
• IFRS Sustainability Disclosure Taxonomy — This project has been removed from the work plan since the ISSB published the disclosure taxonomy in April 2024.

The above is a faithful com­par­i­son of the IASB and ISSB work plan at 26 March 2024 and 29 April 2024. For access to the current work plan at any time, please click here.

The report for 2023 provides an overview of the IFRS Foun­da­tion’s ac­tiv­i­ties during the past year which included:

• Completion of the technical decision-making on two IFRS Accounting Standards: IFRS 18 (issued in April 2024) and IFRS 19 (to be issued in May 2024).
• Launch of the IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2).
• Opening of new office in Beijing and increased support of its office in Tokyo.

In addition, the report sets out the Foun­da­tion’s, IASB’s and ISSB's pri­or­i­ties for 2024.

For more in­for­ma­tion, see the press release and annual report on the IFRS Foun­da­tion website.

The podcast discusses recent activities of the ISSB, including its April 2024 meeting in Frankfurt, where the ISSB finalised its decisions on its next two-year work plan. The ISSB decided to begin two new research projects on biodiversity, ecosystems and ecosystem services, and human capital.

The podcast also gives an outlook on the next steps of the ISSB, including the publication of new educational material on current and anticipated financial effects, the launch of the IFRS Sustainability Disclosure Taxonomy and the forthcoming joint educational material with EFRAG on interoperability.

For more information and access to the podcast, please see the press release on the IFRS Foundation website.

The Consultation Paper (CP) 24/8 Extending the Sustainability Disclosure Requirements (SDR) regime to Portfolio Management, follows the FCA’s October 2022 con­sulta­tion paper (CP22/20) and corresponding Policy Statement (PS 23/16) on SDR and investment labels, which introduced a package of measure for fund managers. 

The package of measures aimed to protect consumers by ensuring that they are provided with all of the information necessary to make informed investment decisions.  The package of measures ultimately aimed to provide greater transparency, consistency and trust in the market for sustainable investment products and sought to minimise greenwashing by companies.  

The FCA is proposing to extend the SDR and investment labels regime to all to all forms of portfolio management services, including where the portfolio management offering (the agreements or arrangements) are model portfolios, customised portfolios and/or bespoke portfolio management services (tailored to the clients’ needs and preferences).  The FCA indicates that as the SDR and labelling regime has been developed primarily for retail investors, the proposals to extend the regime are primarily aimed at wealth management services for individuals and model portfolios for retail investors.  Firms offering portfolio management services to professional clients (or institutional investors) can alo opt in to the labelling regime.

The FRC is proposing that:

• The labelling and naming and marketing requirements, and the associated consumer-facing and pre-contractual disclosures, come into force on 2 December 2024.
• Firms with assets under management (AUM) greater than £50 billion will need to produce on-going product-level and entity-level disclosures by 2 December 2025
• Firms with AUM greater than £5 billion will need to start producing entity-level disclosures by 2 December 2026.

The consultation closes on 14 June 2024.

Concurrently with the publishing of CP 24/8, the FCA has published FG 24/3 Finalised non-handbook guidance on the Anti-Greenwashing Rule.  This rule, which applies to all FCA authorised firms, was included as part of the package of measures in PS 23/16 and comes into force from 31 May 2024.  The FCA's Guidance is designed to help firms understand and implement the anti-greenwashing rule.  

A press release, Consultation Paper (CP24/8) and are the guidance on the anti-greenwashing rule (FG24/3) are available on the FCA website.

A summary of the agenda is set out below:

Agenda papers for the meeting are available on the IFRS Foundation website.

ISSB consultation on agenda priorities: The ISSB discussed feedback on four proposed projects: biodiversity, ecosystems and ecosystem services (BEES); human capital; human rights; and integration in reporting. The staff have applied the agreed upon criteria to assess each proposed project. Based on these, the ISSB decided to add to its work plan research projects on information about risks and opportunities associated with BEES and human capital. The ISSB decided not to add to its work plan projects about human rights, integration in reporting or any other topics.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.