FSB Endorses TCFD Recommendations as Basis for Climate Risk Disclosure
FSB published its response to the consultation paper of IFRS Foundation on sustainability reporting. As part of its response, FSB welcomed the recommended approach by the Trustees of the IFRS Foundation to initially focus on standards for climate-related financial disclosures, to promote globally consistent disclosures and avoid fragmentation. FSB strongly encourages the IFRS Foundation to build on the work of the FSB Task Force on Climate-related Financial Disclosures (TCFD), by using the TCFD recommendations (published in 2017) as the basis for standards for climate-related financial disclosures. FSB also encourages national or regional authorities that are developing requirements or guidance for climate-related disclosures to consider using the TCFD recommendations as the basis.
The TCFD recommendations set out a comprehensive framework that has been developed by, and is directly responsive to the needs of, users and preparers of financial filings across a range of financial and non-financial sectors worldwide. The recommendations have attracted widespread support from users and preparers. Future international standards that build on the TCFD recommendations can be complementary, while providing additional standardization and further details to promote greater consistency and comparability of disclosures. This would ensure that steps by the official sector and private sector are well-aligned in promoting globally consistent disclosures and avoiding fragmentation. To further promote global coordination, FSB will explore, with standard-setters and other international bodies, ways to promote globally comparable, high-quality, and auditable standards of disclosure based on the TCFD recommendations. FSB will report to the G20 Finance Ministers and Central Bank Governors meeting on progress in this area in July 2021.
The IFRS Foundation has a core objective of developing high-quality financial reporting standards. As the Foundation evaluates its next steps, FSB encourages the Foundation to consider whether IASB can strengthen its existing IFRS standards and forthcoming management commentary guidance for climate risk so that financially material information for investors and other market participants is sufficiently captured within financial reporting. If a new board is created, it would be important for the new board and IASB to work in close cooperation, given the interconnectedness between types of relevant information material to market participants. During the period the international standards are being considered, FSB will encourage TCFD to continue to promote and develop guidance for the TCFD recommendations, as a step toward maintaining momentum in the development of consistent, decision-useful disclosures.
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Keywords: International, Banking, Insurance, Securities, Climate Change Risk, ESG, Reporting, TCFD Recommendations, IFRS, Disclosures, Responses to Consultation, FSB
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