The International Sustainability Standards Board (ISSB) published the Exposure Draft, “IFRS S2 Climate-related Disclosures” (Climate Exposure Draft). It builds on the recommendations of the Task Force on Climate-Related Financial Disclosures, incorporating industry-based disclosure requirements derived from Sustainability Accounting Standards Board standards.
The Climate Exposure Draft sets out proposed requirements to identify, measure, and disclose climate-related risks and opportunities. This information, and the information from an entity's general-purpose financial reporting, will support the assessment of future cash flows, including their amounts, timing, and certainty over the short, medium, and long terms. This assessment will, in turn, inform the analysis of an entity’s enterprise value.
The Climate Exposure Draft proposes an entity be required to provide information that enables users of general-purpose financial reporting to understand the following:
- Governance: The governance processes, controls, and procedures an entity uses to monitor and manage climate-related risks and opportunities.
- Strategy: The climate-related risks and opportunities that could enhance, threaten, or change an entity’s business model and strategy over the short, medium, and long terms.
- Risk management: How an entity identifies, assesses, manages, and mitigates climate-related risks and opportunities.
- Metrics and targets: The metrics and targets used to manage and monitor an entity’s performance in relation to climate-related risks and opportunities.
Such information would be presented in a way that helps users of general-purpose financial reporting understand the interrelationships between the disclosures.