New [IFRS] report sets out global progress towards both mandated and voluntary corporate climate-related disclosures
November 12, 2024
Over 1,000 companies have referenced the International Sustainability Standards Board (ISSB) in their reports and 30 jurisdictions are making progress towards introducing ISSB Standards in their legal or regulatory frameworks.
These are some of the key findings of a detailed progress report presented to the Financial Stability Board (FSB) by the IFRS Foundation today. The report also sets out alignment of disclosures with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. The IFRS Foundation took on responsibility for recording climate-related disclosure progress when the TCFD disbanded in 2023.
82% of companies disclosed information in line with at least one of the 11 TCFD recommendations as companies around the world turn their attention to climate-related disclosures. However, with less than 3% of these companies reporting in line with all 11 TCFD recommended disclosures, few companies provide disclosures that cover the company’s climate-related governance, strategy, risk management or metrics and targets. If the omitted information is material, it indicates investors are not currently receiving the information needed to assess and price climate-related risks and opportunities.
This is an important backdrop to the move to regulatory adoption of the ISSB Standards after their endorsement by IOSCO in July 2023. The strong jurisdictional progress towards the introduction of sustainability-related disclosure requirements by adopting or otherwise using ISSB Standards and the shift from recommended to mandated disclosures should result in an increase in the availability of robust, material sustainability-related information for use in global capital markets.
The report shares information about the status of the 30 jurisdictions that are progressing towards introducing ISSB Standards in their regulatory frameworks, as well as insights into how companies are transitioning from disclosures prepared using the TCFD recommendations to disclosures prepared using ISSB Standards.
A separate analysis by the IFRS Foundation on some key features in these 30 jurisdictional frameworks illustrates:
Jurisdictions see the value of Scope 3 GHG emissions disclosures. All 29 jurisdictions that have finalised or published proposals on climate-related disclosures have included Scope 3 GHG emissions disclosure requirements, with some allowing or proposing brief extensions of transitional reliefs to prepare for the requirements.
Jurisdictions see the value of including industry-specific disclosure requirements. 28 jurisdictions have included or are considering requirements for industry-specific disclosure.
Just two of the 30 jurisdictions have signalled the intention to make industry-specific disclosure voluntary, at least initially.
Climate-related risks and opportunities are clearly important to investors, but so are disclosures on the full spectrum of sustainability-related risks and opportunities. 90% of the jurisdictions have included or are considering requirements for disclosure covering all sustainability-related risks and opportunities over time. Some jurisdictions are initially focused on the disclosure of climate-related risks and opportunities.
In some cases, jurisdictions have moved closer to the ISSB Standards relative to their initial proposals in response to calls from stakeholders for greater alignment with ISSB Standards and to secure comparability of disclosures by adhering to the global baseline.
Stakeholders, in particular investors and companies with significant cross-border operations expected to be subject to more than one set of jurisdictional requirements, perceive a risk in replacing the current patchwork of voluntary initiatives with regulatory fragmentation should jurisdictions modify ISSB Standards extensively. Other companies likely to be part of global supply chains are also advocating for alignment with the global baseline to ensure a streamlined global reporting regime that avoids unnecessary burden.
A key aspect of the introduction of ISSB Standards into regulatory frameworks is that a number of jurisdictions will introduce industry-specific disclosure requirements for the first time. These steps demonstrate the value of industry-specific disclosures for capital markets and the fact that the SASB Standards—the only comprehensive established suite of industry standards for sustainability disclosure globally—provide for an important component of the ISSB’s global baseline of disclosures supporting high-quality implementation of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information.
The Financial Stability Board has also published its 2024 progress report on Achieving Consistent and Comparable Climate-related Disclosures today, summarising the key findings from the IFRS Foundation’s report.
ISSB Chair Emmanuel Faber said:
This progress report underscores the significant and encouraging progress in disclosure of climate-related information. But further action is needed to address the fact investors are still not receiving the information they need to assess and price appropriately climate and other sustainability-related risks and opportunities. Through jurisdictional initiatives and the voluntary choices companies are making, often in response to investor demand, we continue to see momentum build.
The introduction of sustainability-related disclosure requirements into regulatory frameworks through the adoption or other use of ISSB Standards, building on the strong foundations laid through the TCFD recommendations and progressing towards a more comprehensive and assurable set of requirements, is of vital importance for the healthy functioning of capital markets around the world.
[ifrs.org]
