IASB Briefing Explains How IFRS Standards Address Climate Change Risks
IASB published a briefing that explains how existing requirements within IFRS standards relate to climate change risks and other emerging risks. The briefing shows how the principle-based approach of IFRS standards means that climate change and other emerging risks are addressed by the existing requirements, although such risks are not explicitly referenced. It also outlines the current work of IASB on its Management Commentary project—a narrative report that gives context for the financial statements and additional insight into the long-term prospects of a company. The Board is also updating its non-mandatory guidance on management commentary, where it would expect companies to address material environmental and societal issues, complementing the information in financial statements.
IASB is often asked why IFRS standards do not mention climate change. While the phrase "climate-change" does not feature in its requirements, IFRS standards do address issues that relate to climate-change risks and other emerging risks. Thus, IASB has prepared this publication to help analysts and investors better understand its requirements and guidance on the application of materiality. The article addresses:
- Board guidance on how to make materiality judgments
- Applying IFRS Practice Statement 2 Making Materiality Judgments to climate-related and emerging risks
- Financial reporting considerations when applying IFRS standards
- Disclosing climate-related and other emerging risks in the financial statements
- Management commentary: providing context to the financial statements
- Summary: materiality judgments should serve information needs of investors
Keywords: International, Accounting, Banking, Insurance, Securities, Climate Change Risks, ESG, IFRS Standards, Reporting, Disclosures, Materiality Judgements, IASB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Previous Article
FIN-FSA Grants Five Registrations as Virtual Currency ProviderNext Article
FSB Publishes Summary of Plenary Meeting in ParisRelated Articles
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
EC Rule on Contractual Recognition of Write Down and Conversion Powers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
ECB to Consider Climate Risks When Reviewing Collateral Framework
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
SRB Provides Update on Approach to Prior Permissions Regime
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
APRA Issues Further Guidance on Application of Securitization Standard
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
ACPR Publishes Corrective Version of RUBA Taxonomy
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
