Interoperability of IFRS sustainability-related standards and other frameworks

The ISSB is currently in dialogue with other bodies, particularly EFRAG, to ensure interoperability of the ISSB’s global baseline with the standards under development in particular jurisdictions, notably the European Union (cf. our feature in this issue on the development of ESRSs). In this context, the ISSB has tentatively confirmed:

Keywords: Mazars, Thailand, Sustainability, IFRS, ISSB, EFRAG, European Union

22 December 2022

  • that it will use the four pillars identified by the Task Force on Climate-Related Financial Disclosures (TCFD) to structure the core content of the disclosure requirements in the IFRS S1 and S2 draft standards. Thus, information will be required on (i) governance; (ii) strategy; (iii) risk management; and (iv) metrics and targets;
  • the meaning of the “global baseline”, in particular:
    • that the disclosures required on sustainability under IFRS standards are designed to meet the information needs of investors, lenders and other creditors;
    • that the disclosures required are subject to a materiality assessment;
    • and that these disclosures may be presented alongside disclosures to meet other requirements, such as jurisdiction-specific regulatory requirements, provided that the additional disclosures do not obscure the IFRS disclosures.

Still with a view to making the global baseline as broad as possible, the ISSB also redeliberated the use of scenario analysis in the context of (i) defining and explaining transition plans, and (ii) carrying out climate resilience analysis. Most of the October redeliberations on the draft IFRS S2 standard simply resulted in the ISSB confirming the draft provisions. However, the international standard-setter also tentatively decided:

  • to add a requirement for an entity to disclose how it uses climate-related scenario analysis to support its identification of climate-related risks and opportunities;
  • to clarify that an entity’s net greenhouse gas (GHG) emission reduction targets and its planned use of carbon credits must be presented separately from its gross emission reduction targets;
  • to clarify the different types of targets and the role played by emission reduction targets in the transition to a low-carbon economy;
  • to clarify that an entity shall be required to disclose all the emission reduction targets it has set itself (both net and gross emission reduction targets) and those it is required to meet under local legislation.