Climate-related Disclosures — Financed and Facilitated Emissions

Date recorded:

Financed and Facilitated Emissions (Agenda Paper 4D)

The Exposure Draft (ED) IFRS S2 Climate-related Disclosure proposed the addition of “Transition Risks Exposure” as a disclosure topic in the industry-based disclosure requirements for four industries–commercial banks, investment banking and brokerage, asset management and custody activities and insurance. The ED proposed to require entities in these industries to disclose several metrics relating to financed and facilitated emissions. The absolute greenhouse gas emissions that financial institutions finance through their loans and investments are often referred to as financed emissions and facilitated emissions has been applied to describe other off-balance-sheet activities performed by financial institutions, such as underwriting, securitisation and advisory services.

This paper provided a high-level summary of the feedback received on the proposals related to financed and facilitated emissions, described the matters that the staff thinks the ISSB may need to consider in its redeliberations and discussed the staff’s preliminary proposed approach to redeliberations.

The matters the staff thinks the ISSB may need to consider in its future redeliberations include:

Scope of the proposals:

  • Objective, description, and name of the proposed disclosure topic
  • Asset management and custody activities—Financed emissions as a total of assets under management
  • Investment banking and brokerage—Facilitated emissions

Data considerations:

  • Timing of underlying data
  • Inclusion of Scope 3 emissions in financed and facilitated emissions (“Scope 3 of Scope 3”)

Industry breakdown:

  • Carbon-related industries
  • Use of Global Industry Classification System
  • Emissions intensity—defining units of measure


  • Derivatives
  • Use of risk mitigants

Requests for increased flexibility:

  • Prescription of calculation methodology
  • Effective date of the financed and facilitated emissions disclosures

The ISSB was not asked to make any decisions at this meeting, but it was asked to provide input on the staff’s proposed approach.

ISSB discussion

At the beginning of the discussion, the Vice-Chair and the staff clarified that one of the purposes of this meeting is to get input from ISSB members that could help the staff steer future discussions in terms of what the ISSB should do in response to the feedback received.

Referring to the graph of breakdown by region of respondses in the agenda paper, one ISSB member asked why the number of reponses was high in Europe relative to other regions. The staff replied that in cases where an industry body provided a response, it was counted as one in the graph. However, in reality there are many entities beloging to that industry body. The staff said that much of the input, including from outreach activities, was from other regions outside of Europe.

With respect to the scope of the proposals, the Vice-Chair observed that there are two aspects of transition risks related to entities in financial sector. One aspect is potential impacts on the credit risk of loans that an entity advances to its counterparty, which can be affected as the counterparty changes its business model in transitioning to lower-carbon economy. The other aspect is that financial instituions are subject to reputational risks and customer preferences. The Vice-Chair and other ISSB members said that it was very critical to understand which aspect of the transition risks the ISSB tries to address when the ISSB redeliberates the proposals.

One ISSB member said that the proposals on financed and facilitated emissions are only a part of the industry-based metrics disclosure requirements for entities in the financial sector and that when redeliberating, the ISSB should be mindful of other disclosure required for these entities in addition to those relating to financed and facilitated emissions.

The Chair suggested that the standards should be clear as to what falls into financed emissions and what falls into facilitated emissions, especially when different disclosure is required for different types of emissions.

With respect to the proposals relating to asset management and custody activities, one ISSB member noted that the propsed metric would not require a breakdown by asset class, sector or strategy. He also noted that some respondents said that a breakdown by portfolio or strategy would be more useful and suggested that the staff consider how the proposals can lead to more useful information by potentially including a further breakdown.

With respect to the topic on data consideration, one ISSB member suggested the staff to consider providing an exemption to entities regarding disclosure stemming from transactions in which a structured entity is involved. The Chair commented that there is not much substance in the notion of “scope 3 of scope 3” and that in his experience most of the funding from financial institutions to a counterparty ends up in scope 3 of that counterparty and not in scope 1 or scope 2. Accordingly, it is not compelling for him that financial institutions would only look at scope 1 and scope 2 of their couterparty. While another ISSB member agreed with the Chair’s comments from a conceptual standapoint, he suggested that the ISSB should be aware of practical challenges in providing “scope 3 of scope 3” information with high quality. The Vice-Chair suggested that when the ISSB redeliberates, it would be helpful for the ISSB to consider the issue from a conceptual standpoint separately from a practical standpoint.

With regard to the topic on complexity, one ISSB member noted responses relating to proposals on facilitated emissions and derivatives were similar, in a sense that calculating methodologies related to these are too nascent, but that the staff took a different stance in terms of its proposed actions towards these concerns. The staff explained that the staff had observed that banks disclosed information relating to facilitated emissions now and that this topic came up often during the consultation process whereas with regard to derivatives many industry bodies the staff reached out to said that it was too early. The Vice-Chair suggested when the ISSB considers a way forward for derivatives, it should not be based on whether the disclosure practice around derivatives is new or not, and instead it should be based on what information would be useful regarding derivatives keeping in mind the two aspects of transition risks she mentioned at the beginning of the discussion.

No decisions were made at this meeting.

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