Is establishing the International Sustainability Standards Board (ISSB) to develop a baseline global sustainability reporting standard, using the Task Force on Climate-related Financial Disclosures (TCFD) framework as a foundation, along with the work of an alliance of sustainability standard setters. Starting from January 1st 2024, as ISSB Standards begin to be applied globally, the IFRS Foundation will assume the responsibilities previously held by the TCFD concerning the monitoring of progress towards climate-related disclosures. The application of IFRS 2 will also satisfy the TCFD Recommendations, and IFRS S1 requires companies to consider the Sustainability Accounting Standards Board (SASB) Standards for identifying sustainability-related risks and opportunities in the absence of a specific IFRS Sustainability Disclosure Standard.

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IFRS 2 Scope and Objectives 

To achieve this objective, an entity is required to disclose information about: [IFRS 2:25]

 

• the processes and related policies the entity uses to identify, assess, prioritize and monitor climate-related risks, including information about:
  o  the inputs and parameters the entity uses (for example, information about data sources and the scope of operations covered in the processes);
  o  whether and how the entity uses climate-related scenario analysis to inform its identification of climate-related risks;
  o  how the entity assesses the nature, likelihood and magnitude of the effects of those risks (for example, whether the entity considers qualitative factors, quantitative            thresholds or other criteria);
  o  whether and how the entity prioritizes climate-related risks relative to other types of risk;
  o  how the entity monitors climate-related risks; and
  o  whether and how the entity has changed the processes it uses compared with the previous reporting period.

• the processes the entity uses to identify, assess, prioritize and monitor climate-related opportunities, including information about whether and how the entity uses climate-related scenario analysis to inform its identification of climate-related opportunities; and

• the extent to which, and how, the processes for identifying, assessing, prioritizing and monitoring climate-related risks and opportunities are integrated into and inform the entity’s overall risk management process.

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Governance

The objective of climate-related financial disclosures on governance is to enable users of general purpose financial reports to understand the governance processes, controls and

procedures an entity uses to monitor, manage and oversee climate-related risks and opportunities. [IFRS 2:5]

To achieve this objective, an entity is required to disclose information about the governance body(s) (which can include a board, committee or equivalent body charged with governance) or individual(s) responsible for oversight of climate-related risks and opportunities. Specifically, the entity is required to identify the body(s) or individual(s). [IFRS 2:6(a)]. An entity is also required to disclose information about management’s role in the governance processes, controls and procedures used to monitor, manage and oversee climate-related risks and opportunities. [IFRS 2:6(b)]

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Risk management

The objective of climate-related financial disclosures on risk management is to enable users of general purpose financial reports to understand an entity’s processes to identify, assess, prioritize and monitor climate-related risks and opportunities, including whether and how those processes are integrated into and inform the entity’s overall risk management process.[IFRS 2:24]

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• To achieve this objective, an entity is required to disclose information about: [IFRS 2:25]

  • the processes and related policies the entity uses to identify, assess, prioritize and monitor climate-related risks, including information about:

  • the inputs and parameters the entity uses (for example, information about data sources and the scope of operations covered in the processes);

  • whether and how the entity uses climate-related scenario analysis to inform its identification of climate-related risks;

  • how the entity assesses the nature, likelihood and magnitude of the effects of those risks (for example, whether the entity considers qualitative factors, quantitative thresholds or other criteria);

  • whether and how the entity prioritizes climate-related risks relative to other types of risk;

  • how the entity monitors climate-related risks; and

  • whether and how the entity has changed the processes it uses compared with the previous reporting period.​

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Metrics and targets

• Enable users to understand an entity’s performance in relation to its climate- related risks and opportunities, progress on climate-related targets, it is required by. [IFRS 2:27]

• Entities are required to disclose: [IFRS 2:28]
  o   Information relevant to the cross-industry metric categories;
  o  Industry-based metrics that are associated with particular business models, activities or other common features that characterize participation in an industry; and
  o  Targets set by the entity, and any targets it is required to meet by law or regulation, to mitigate or adapt to climate-related risks or take advantage of climate-related opportunities, including metrics used by the governance body or management to measure progress towards these targets.

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Climate-related metrics and targets

Greenhouse Gases (GHG):

• Measure GHG in accordance with the Greenhouse Gas Protocol:
  o  A Corporate Accounting and Reporting Standard (2004), unless required by a jurisdictional authority or an exchange on which the entity is listed to use a different method.

• Disclose the approach used to measure GHG, including:
  o   Measurement approach, inputs, and assumptions used.
  o   Reason for choosing the measurement approach, inputs, and assumptions.
  o  Any changes made to the measurement approach, inputs, and assumptions during the reporting period and reasons for those changes.

• Disaggregate Scope 1 and Scope 2 GHG between:

• The consolidated accounting group (e.g., parent and its consolidated subsidiaries).

• Other investees excluded from the consolidated accounting group (e.g., associates, joint ventures, and unconsolidated subsidiaries).

• For Scope 2 GHG, disclose location-based Scope 2 greenhouse gas emissions and provide information about contractual instruments necessary to inform users’ understanding of Scope 2 emissions.

• For Scope 3 GHG, disclose:
  o   Categories included within the entity’s measure of Scope 3 greenhouse gas emissions following the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting       and Reporting Standard (2011).

• Additional information about Category 15 greenhouse gas emissions or those associated with investments (financed emissions) if the entity's activities include asset management, commercial banking, or insurance.

• Climate-Related Transition Risks:

  • The amount and percentage of assets or business activities vulnerable to climate-related transition risks.

• Climate-Related Physical Risks:

  • The amount and percentage of assets or business activities vulnerable to climate-related physical risks.

• Climate-Related Opportunities:

  • The amount and percentage of assets or business activities aligned with climate-related opportunities.

• Capital Deployment:

  • Amount of capital expenditure, financing, or investment deployed towards climate-related risks and opportunities.

• Internal Carbon Prices:

  • Explanation of whether and how the entity applies a carbon price in decision-making (e.g., investment decisions, transfer pricing, and scenario analysis).

  • The price for each metric ton of greenhouse gas emissions used to assess the costs of emissions.

• Remuneration:

  • Description of whether and how climate-related considerations are factored into executive remuneration.

  • The percentage of executive management remuneration recognized in the current period linked to climate-related considerations.

 

Climate-Related Targets

• Disclose the quantitative and qualitative climate-related targets

• monitor progress towards achieving strategic goals, 

• targets required by law or regulation,

• GHG for each target, the entity is required to disclose: [IFRS 2:33]

 

Metric used to set the target;

• the objective of the target (for example, mitigation, adaptation or conformance with science- based initiatives);

• the part of the entity to which the target applies (for example, whether the target applies to the entity in its entirety or only a part of the entity, such as a specific business unit or specific geographical region);

• the period over which the target applies;

• the base period from which progress is measured;

• any milestones and interim targets;

• if the target is quantitative, whether it is an absolute target or an intensity target;

• how the latest international agreement on climate change, including jurisdictional commitments that arise from that agreement, has informed the target.

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Industry-based guidance

• Industry-based Guidance IFRS 2 suggests ways to apply some of the disclosure requirements in IFRS 2.

• Guidance does not create additional requirements.

• Guidance suggests ways to identify and disclose information about climate- related risks and opportunities/
  o   associated with particular business models,
  o   industry related activities or other common features.

• An entity is required to refer to and consider the applicability of the information set out in the guidance  [IFRS 2:IB1]

• Industry-based guidance  derived from ISSB.

• Industry- based, subset is likely to apply to any entity. [IFRS 2:IB2]

 

Effective date and transition

An entity is required to apply IFRS 2 for annual reporting periods beginning on or after 1 January 2024. Earlier application is permitted. If an entity applies IFRS 2 earlier, it is required to disclose that fact and apply IFRS S1 at the same time. [IFRS 2:C1]

 

• Entity is not required to provide the disclosures specified in IFRS 2 for any period before the beginning of the annual reporting period in which an entity first applies IFRS 2 (the date of initial application).

• Entity is not required to disclose comparative information in the first annual reporting period in which it applies IFRS 2. [IFRS 2:C3]

• First annual reporting period in which an entity applies IFRS 2, it is permitted to use one or both of the following reliefs: [IFRS 2:C4];
  o   if, in the annual reporting period immediately preceding the date of initial application of IFRS 2, the entity used a method for measuring its greenhouse gas emissions other than the GHG Protocol: A Corporate Accounting and Reporting Standard (2004), the entity is permitted to continue using that other method; and
  o   an entity is not required to disclose its Scope 3 GHG which includes, if the entity participates in asset management, commercial banking or insurance activities, the additional information about its financed emissions. If an entity uses either of these reliefs, the entity is permitted to continue to use that relief for the purposes of presenting that information as comparative information in subsequent reporting periods. [IFRS 2:C5]

 

Objective and scope

• An entity to disclose it's climate-related risks and opportunities

• For primary users in making decisions providing resources to the entity. [IFRS 2:1];

• For climate- related risks and opportunities reasonably expected to affect the entity’s cash flows,

• its access to finance

• cost of capital over the short, medium or long term. [IFRS 2:2]​