Appendix 1. Climate and sustainability reporting progress

International non-financial reporting frameworks and standards

There have been several major developments in relation to non-financial reporting in recent years, including:

  • The publication, in June 2017, of the final report of the TCFD. The recommendations of the TCFD are considered international best practice for climate-related disclosures.

Recommendations of the Task Force on Climate-related Financial Disclosures, June 2017(external link)

  • Decisions by several international sustainability and climate organisations to align their reporting frameworks and standards with TCFD.
  • A decision, in November 2021, by the International Financial Reporting Standards (IFRS) Foundation Trustees to establish the International Sustainability Standards Board (ISSB). The ISSB’s objective is to establish a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.

Path to global baseline: ISSB outlines actions required to deliver global baseline of sustainability disclosures(external link) — IFRS

  • Increased coordination between, and consolidation of, international non-financial reporting and standard setting organisations.

In March 2022, the ISSB launched consultation on its first two proposed standards, one on general sustainability-related disclosure requirements, the other on climate-related disclosure requirements. Submissions closed on 29 July 2022.

ISSB delivers proposals that create comprehensive global baseline of sustainability disclosures(external link) — IFRS

Overseas sustainability and climate-reporting developments

Governments and regulators are increasingly responding to the growing demand for companies to disclose sustainability and climate information to their investors by considering the options for mandatory climate and sustainability disclosures.

TCFD-based climate disclosures have or are being introduced by governments or securities exchanges in Canada, Hong Kong, Japan, Singapore, Switzerland, the United Kingdom and the United States. The European Union and the United Kingdom have outlined proposals for sustainability reporting that would be underpinned by mandatory standards.

United Kingdom

The United Kingdom is currently phasing-in mandatory climate-related disclosures aligned to the TCFD framework. The reporting obligations commenced in November 2021 for premium listed companies. In April 2022, they were extended to other listed companies, large private companies and financial institutions.

UK to enshrine mandatory climate disclosures for largest companies in law, 29 OCtober 2021(external link) — UK Government

In July 2021, the Chancellor of the Exchequer announced that integrated Sustainability Disclosure Requirements will be introduced. In October 2021, the Government stated that:

  • the disclosure requirements will be introduced incrementally and apply to UK-listed companies, banks, insurers, investment scheme managers and investment products
  • the sustainability standards to be developed by the ISSB will provide the baseline for reporting information that is material to investors
  • firms will also be required to provide information on how they impact the environment, in accordance with the UK’s Green Taxonomy*, which is currently being developed.

To deliver this the Government will create a mechanism, through legislation, to adopt and endorse ISSB-issued standards for use in the UK. Regulators will set out sector-specific requirements through their existing rule-making processes.

HM Treasury et al, 'Greening Finance: A Roadmap to Sustainable Investing', October 2021, pp.11-19, 23 & 36-38(external link) — HM Government

* The taxonomy has six environmental objectives. The first two, which are being consulted on in 2022, are climate change mitigation and climate change adaptation. The four remaining objectives are sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control and protection and restoration of biodiversity and ecosystems.

The European Union

European Union Directive 2014/95/EU (Directive 2014/95/EU, 22 October 2014), or the Non-Financial Reporting Directive (NFRD) as it is more commonly known, requires large companies to publish reports on the social and environmental impacts of their activities.

Directive 2014/95/EU(external link) — European Union Law

In April 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) that would amend the NFRD. Among other things, the CSRD:

  • would introduce more detailed reporting requirements relating to environmental rights, social rights, human rights and governance factors
  • would require reporting in accordance with mandatory EU sustainability reporting standards
  • would require assurance of the reported information by an accredited independent auditor or certifier
  • provides for the European Financial Reporting Advisory Group (EFRAG) to develop draft sustainability reporting standards. EFRAG published the first set of draft standards on 29 April 2022. Submissions closed on 8 August 2022.

EFRAG, 2021(external link) 

EFRAG, 2022(external link)

In June 2022, the European Council and European Parliament reached a “provisional political agreement” in support of the CSRD. Under the agreement, the CSRD would apply to all listed or unlisted European firms with more than 250 employees, €40 million revenue and/or €20 million assets. It will also apply to non-European companies that generate turnover of €150 million in the EU. Implementation will be phased in from 2024 to 2028.

New rules on corporate sustainability reporting: provisional political agreement between the Council and the European Parliament, June 2022(external link) — European Council

United States

On 21 March 2022, the Securities and Exchange Commission (SEC) released draft rule changes that would require most SEC registrants to include climate-related disclosures in their Securities Act registration statements and Exchange Act periodic reports. The objective is to provide investors with consistent, comparable and decision-useful information.

The proposal is based on, but not identical to, the TCFD framework and GHG Protocol. It includes disclosures about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics, including GHG emissions. It also proposes a phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status.

SEC proposes rules to enhance and standardize climate-related disclosures for investors, 21 March 2022(external link) — SEC

Scope 1 and 2 GHG emissions disclosures would require independent attestation, but not until the second year that the registrant is subject to the disclosure requirements.

It does not take a principles-based approach, instead proposing extensive and specific disclosures. Submissions on the proposed rule changes closed on 17 June 2022.

SEC extends comment period for proposed rules on climate-related disclosures, reopens comment period for proposed rules regarding private fund advisers and Regulation ATS, 9 May 2022(external link) — SEC

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