Following the Financial Stability Board’s announcement that the work of the Task force on Climate-related Financial Disclosures (TCFD) has been completed—with the ISSB Standards marking the 'culmination of the work of the TCFD'—the IFRS Foundation has today published a comparison of the requirements in IFRS S2 Climate-related Disclosures and the TCFD recommendations.
The requirements in IFRS S2 are consistent with the four core recommendations and eleven recommended disclosures published by the TCFD.
As demonstrated in this comparison, companies that apply the ISSB Standards will meet the TCFD recommendations and so do not need to apply the TCFD recommendations in addition to the ISSB Standards.
There are additional requirements in IFRS S2. These include the requirements for companies to disclose industry-based metrics, to disclose information about their planned use of carbon credits to achieve their net emissions targets and to disclose additional information about their financed emissions.
Although the work of the TCFD is completed, the TCFD recommendations remain available for companies to use should they choose to. Using the recommendations is a good entry point for companies as they move to use the ISSB Standards.
The TCFD has been a trailblazer in raising the practice and quality of climate-related disclosures, with the ISSB building on this legacy.
The incorporation of the TCFD recommendations into the ISSB Standards provides yet further simplification of the so-called ‘alphabet soup’ of disclosure initiatives for companies and investors.
The Financial Stability Board has also asked the IFRS Foundation to take over the monitoring of the progress on companies’ climate-related disclosures from the TCFD.
One of the drivers of the establishment of the ISSB was the need to address the ‘alphabet soup’ of sustainability reporting initiatives by building on and incorporating leading investor-focused sustainability disclosure initiatives into the ISSB Standards.
With the finalisation of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 efforts to reduce fragmentation have been advanced.
But that does not mean these standards and frameworks have immediately disappeared. So, where are we now?
The Financial Stability Board has announced that the work of the TCFD has been completed.
Companies applying IFRS S1 and IFRS S2 will meet the TCFD recommendations as the recommendations are fully incorporated into the ISSB Standards.
Companies can continue to use the TCFD recommendations should they choose to do so, and some companies may still be required to use the TCFD recommendations.
Responsibility for the SASB Standards now sits with the ISSB. The ISSB Standards build on the SASB Standards.
The SASB Standards have a prominent role in helping companies to apply IFRS S1 and IFRS S2.
IFRS S1 requires companies to consider the SASB Standards to identify sustainability-related risks and opportunities and disclose related information for topics beyond climate.
IFRS S2 provides accompanying guidance on industry-based disclosures derived from the climate-related topics and metrics in the SASB Standards.
The ISSB has committed to maintain, enhance and evolve the SASB Standards and encourages preparers and investors to continue to use them.
The Climate Disclosure Standards Board (CDSB) was consolidated into the IFRS Foundation in 2022.
There is useful content in the CDSB Framework Application Guidance for Water-related Disclosures and the CDSB Framework Application Guidance for Biodiversity-related Disclosures that companies may refer to when applying IFRS S1 to identify sustainability-related risks and opportunities and to disclose related information.
Responsibility for the Integrated Reporting Framework is jointly held by the ISSB and its sister board the International Accounting Standards Board (IASB).
IFRS S1 builds on the concept of resources and relationships found in the Integrated Reporting Framework to describe how sustainability can affect a company’s prospects.
Companies can use the Integrated Reporting Framework to integrate and present reporting, including disclosures prepared applying ISSB Standards.