The IFRS Foundation has published new guidance designed to support companies in disclosing their climate
transition plans.
The latest framework aims to improve the quality, consistency, and comparability of climate-related disclosures under the International Sustainability Standards Board’s (ISSB) IFRS S2 Climate-related Disclosures standard.
It will also enhance global ESG reporting and foster greater transparency in sustainable finance.
The new guidance, building upon the work of the UK’s Transition Plan Taskforce (TPT), which the IFRS Foundation assumed responsibility for last year, is a crucial step in addressing the fragmentation of reporting on climate transition plans. Such fragmentation has proven costly for both companies preparing disclosures and investors attempting to make
informed decisions.
While IFRS S2 does not mandate that companies have a transition plan, it does require the disclosure of material information about sustainability-related risks and opportunities, including those related to climate transition.
The newly released guidance focuses on enabling entities to provide high-quality information about their climate-related transition, encompassing both mitigation and adaptation strategies.
It aims to clarify what information is relevant to disclose regarding a company’s strategy and goals for its transition to a lower-carbon or climate-resilient economy.
“This guidance document addresses the fragmentation of disclosures about transition plans—which is costly for both preparers of information and investors—and provides inspiration for entities that are applying IFRS S2 when making disclosures about their climate-related transition plans,” said Sue Lloyd, Vice-Chair, ISSB. “This guidance aims to help preparers determine what information is relevant to disclose regarding their strategy and goals related to their climate-related transition.”
The IFRS Foundation launched the ISSB in November 2021 at COP26 with the goal of developing a global baseline of sustainability disclosures for capital markets. Their inaugural standards, IFRS S1 (General Requirements for Disclosure of Sustainability-Related Financial Information) and IFRS S2 (Climate-Related Disclosures), were released in June 2023. With 36 jurisdictions already moving to adopt or otherwise use these ISSB standards, this new guidance will play a vital role in ensuring consistent and credible climate reporting worldwide.
