Featured Product

    IFRS Examines Incorporation of Climate Risk Issues into IFRS Standards

    November 20, 2020

    The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements. The document, which is intended to support consistent application of requirements in IFRS standards, contains a non-exhaustive list of examples of when companies may need to consider climate-related matters in their reporting. The material, however, does not add to or change the requirements in the standards. The material has been produced according to the requirements set out in the revised Due Process Handbook, which was published in August 2020.

    IFRS standards do not refer explicitly to climate-related matters. However, companies must consider climate-related matters in applying IFRS standards when the effect of those matters is material in the context of the financial statements taken as a whole. The published material has been developed in response to stakeholder requests for further information on this topic. The material complements an article that IASB member, Nick Anderson, wrote on this topic in November 2019. The material sets out examples illustrating when IFRS standards may require companies to consider the effects of climate-related matters in applying the principles in a number of standards: 

    • IFRS 7 on disclosures related to financial instruments requires disclosure of information about a company’s financial instruments, including information about the nature and extent of risks arising from financial instruments and how the company manages those risks. Climate-related matters may expose a company to risks in relation to financial instruments. For example, for lenders, it may be necessary to provide information about the effect of climate-related matters on the measurement of expected credit losses or on concentrations of credit risk. For holders of equity investments, it may be necessary to provide information about investments by industry or sector, identifying sectors exposed to climate-related risks, when disclosing concentrations of market risk.
    • Climate-related matters may affect the accounting for financial instruments in a number of ways. Climate-related matters may also affect a lender’s exposure to credit losses. Additionally, assets could become inaccessible or uninsurable, affecting the value of collateral for lenders. In recognizing and measuring expected credit losses, IFRS 9 on financial instruments requires use of all reasonable and supportable information that is available without undue cost or effort. Climate-related matters may therefore be relevant—for example, they could affect the range of potential future economic scenarios, the lender’s assessment of significant increases in credit risk, whether a financial asset is credit impaired and/ or the measurement of expected credit losses.
    • Climate-related matters may increase the frequency or magnitude of insured events or may accelerate the timing of their occurrence. Climate-related matters may, therefore, affect the assumptions used to measure insurance contract liabilities applying IFRS 17. Climate-related matters may also affect required disclosures about the significant judgements and changes in judgements made in applying IFRS 17, and a company’s exposure to risks, concentrations of risk, how it manages risks and sensitivity analysis showing the effect of changes in risk variables.

    Keywords: International, Banking, Insurance, IFRS 9, IFRS 7, IFRS 17, Financial Instruments, Disclosures, Insurance Contracts, Climate Change Risk, ESG, IFRS

    Featured Experts
    Related Articles

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News

    DNB Publishes Multiple Reporting Updates for Banks

    DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.

    February 28, 2023 WebPage Regulatory News

    NBB Sets Out Climate Risk Expectations, Issues Reporting Updates

    The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting

    February 24, 2023 WebPage Regulatory News

    EBA Updates Address Securitization Standards and DGS Guidelines

    The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.

    February 21, 2023 WebPage Regulatory News

    FSB Publishes Letter to G20, Sets Out Work Priorities for 2023

    The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023

    February 20, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8793