The IFRS Foundation will take over responsibility for the monitoring of the progress on companies’ climate-related disclosures from the TCFD next year at the request of the Financial Stability Board (FSB).
The transfer was announced this week after the foundation officially launched the inaugural global International Sustainability Standards Board (ISSB) Standards, IFRS S1 and IFRS S2, on June 26.
The FSB established the TCFD in 2015 to develop a set of voluntary, consistent disclosure recommendations for use by firms in providing information to investors, lenders and insurance underwriters about their climate-related financial risks. But the FSB said this week the launch of the ISSB Standards marked ‘the culmination of the work’ of TCFD as IFRS S1 and IFRS S2 fully incorporate the benchmark’s recommendations.
The ISSB is working to support the implementation of IFRS S1 and IFRS S2 in 2024. The rules intend to give a baseline of sustainability-related disclosures worldwide, including capacity building and monitoring progress toward the broad use of high-quality disclosures.
Clarifying ‘alphabet soup’ of ESG efforts
Emmanuel Faber, chair of the ISSB, says in a statement that the TCFD has been a ‘trailblazer’ in raising the practice and quality of climate-related disclosures. The benchmark has given much-needed information to investors about climate-related risks and opportunities, he adds.
‘The ISSB has built from and consolidated the market-leading investor-focused sustainability-reporting initiatives to deliver the ISSB Standards, with the TCFD recommendations at the heart of this,’ Faber says.
‘As such, the ISSB welcomes the FSB’s request to transfer the TCFD’s monitoring responsibilities to the ISSB from 2024 and the opportunity to build on the TCFD’s legacy. This announcement provides yet further clarification of the so-called ‘alphabet soup’ of ESG initiatives for companies and investors.’
IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1. The ISSB is consulting on future standard-setting priorities beyond these inaugural standards.
