The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards. The International Accounting Standards Board (IASB) also announced that it has expanded the scope of its maintenance project on the work plan for proposed narrow-scope amendments to IFRS 9 Financial Instruments.
Below are the key announcements of ISSB with respect to the work in the area of sustainability reporting and disclosures:
- In a recently published statement, ISSB is announced further steps in its delivery of the architecture needed for a global baseline as well as partnerships agreed at Sharm El-Sheikh’s COP27 to help jurisdictions prepare for the implementation of climate-related disclosure standards. At COP27, ISSB Chair was slated to share details of the ISSB’s new Partnership Framework with more than 20 partner organizations. The framework is designed to support preparers, investors, and other capital market stakeholders as they prepare to use IFRS Sustainability Disclosure Standards. The Partnership Framework will be a coordinated effort driven by the IFRS Foundation for five years leading up to 2027, with specified focus on key activities in each of the three described phases.
- The G7 Finance Ministers and Central Bank Governors issued a statement on climate issues in which they reiterate their commitment to move toward mandatory climate-related financial disclosures and welcome the International Sustainability Standards Board (ISSB) work to develop a truly global baseline of sustainability disclosures to inform investment decisions.
- ISSB unanimously confirmed Scope 3 greenhouse gas (GHG) emissions disclosure requirements with strong application support, among other key decisions. As part of these requirements, ISSB will develop relief provisions to help companies apply the Scope 3 requirements. ISSB also made significant progress refining its first two proposed sustainability-related disclosure standards―IFRS S1 titled General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 titled Climate-related Disclosures. The aim is to complete deliberations on the proposed Standards around the end of 2022, with a view to issue the final standards as early as possible in 2023.
- ISSB unanimously confirmed that companies will be required to use climate-related scenario analysis to inform resilience analysis. ISSB also agreed to provide application support to preparers including making use of materials developed by the Task Force for Climate-Related Financial Disclosures (TCFD) to provide guidance to preparers on how to undertake scenario analysis. ISSB will provide guidance on which climate scenarios an entity should use, depending on their circumstances, including industry and country exposure, to provide relevant information to investors. This guidance will specify where the inclusion of a Paris-aligned scenario may be relevant.
- ISSB met, on November 03, 2022, to review staff proposals to enhance interoperability with other international and jurisdictional sustainability-related standards. During the meeting, ISSB confirmed a requirement to consider Sustainability Accounting Standards Board (SASB) standards and that the Climate Disclosure Standards Board (CDSB) materials serve as a useful reference for companies to identify sustainability risks and opportunities as well as disclosures. ISSB also discussed about allowing the European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG), and the Global Reporting Initiative (GRI) Standards to be referenced in the absence of directly applicable ISSB Standards.
- ISSB notified that the CDP plans to incorporate the ISSB Climate-related Disclosures Standard into its global environmental disclosure platform and that the Financial Reporting Council of Nigeria announced, at COP27, its decision to move to adopt the ISSB Sustainability Disclosure Standards in Nigeria when they are issued in 2023.
As part of the post-implementation review of IFRS 9, IASB is proposing amendments in response to stakeholder feedback on the Request for Information published in September 2021 as part of the Post-implementation Review of IFRS 9—Classification and Measurement. The proposed amendments will cover three areas: contractual cash flow characteristics, electronic cash transfers, and equity instruments and other comprehensive income. With respect to the electronic cash transfers, amendments have been proposed to the derecognition requirements in IFRS 9 to permit an accounting policy choice to allow an entity to derecognize a financial liability before it delivers cash on the settlement date when specified criteria is met.
Keywords: International, Banking, ESG, Disclosures, Climate Change Risk, IFRS 9, Financial Instruments, Post Implementation Review, Sustainability Standards, SASB Standards, COP27, ISSB, IFRS, IASB
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
The Financial Accounting Standards Board (FASB) is seeking comments, until November 03, 2022, on the proposed technical and other conforming improvements for the 2023 GAAP Financial Reporting Taxonomy.