ISSB3

ISSB confirms requirement to use climate-related scenario analysis

1 November 2022

At the supplementary board meeting the ISSB voted to confirm that companies will be required to use climate-related scenario analysis to report on climate resilience and to identify climate-related risks and opportunities to support their disclosures. 

The ISSB also agreed to provide application support to preparers including making use of materials developed by the Task Force for Climate-Related Financial Disclosures (TCFD) to provide guidance to preparers on how to undertake scenario analysis.

Application support

  • The ISSB will refer to TCFD guidance that sets out types of scenario analysis, including quantitative, partially quantitative, and qualitative. The required approach should have provisions that is scalable to an entity’s circumstances.
  • At a minimum an entity would need to undertake the qualitative form of scenario analysis as a basis for its resilience analysis.
  • The ISSB will provide guidance on which climate scenarios an entity should use, depending on their circumstances, including industry and country exposure, to provide relevant information to investors. This guidance will specify where the inclusion of a Paris-aligned scenario may be relevant.
  • To assist preparers the ISSB will also acknowledge in its guidance within the Standard that ‘off-the-shelf scenarios’ such as those of the Network for Greening the Financial System (NGFS) may be useful resources for companies.

The above will be developed in the final IFRS Sustainability Disclosure Standard S2—Climate-related Disclosures including through guidance issued with the Standard.

Read the full article here.

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