Dive Brief:
- The International Sustainability Standards Board is proposing amendments to its climate-related disclosure framework that would ease scope 3 emissions reporting requirements for companies, according to a Monday update from its parent organization, the International Finance Reporting Standards.
- ISSB published an exposure draft suggesting changes to its IFRS S2 reporting framework. These changes focus on “making it easier for companies to apply the Standards while retaining the decision-usefulness of information provided to investors,” but the standard setter said they are not designed to reduce greenhouse gas emissions disclosures.
- The ESG standard setter — borne out of the coalescence of several sustainability reporting organizations — said the proposed revisions to IFRS S2 would provide companies relief from reporting scope 3 emissions related to derivatives, certain financed or facilitated transactions, and insurance activities.
Dive Insight:
The changes outlined in the draft also seek to provide companies flexibility in adopting an emissions measurement method, beyond the Greenhouse Gas Protocol, for calculating their carbon footprint. The proposed amendments would also allow companies to use global warming potential values other than those established by the latest Intergovernmental Panel on Climate Change assessment, if a jurisdictional authority or an exchange where the company is listed on opts to do so.
ISSB noted that the proposed amendments, especially those related to scope 3 disclosures, are “more likely” to affect entities in the financial sector. Jurisdictions with economies representing more than 55% of the global gross domestic product are aligning or incorporating ISSB’s standards into their domestic regulatory regimes.
The standard setter said it came up with the suggested revisions to IFRS S2 in response to market feedback, framework application challenges identified by stakeholders and adoption issues raised through ISSB’s other engagement activities. ISSB said the amendments aim to provide reporting entities “additional relief and clarify existing relief from specific greenhouse gas emissions disclosure requirements in IFRS S2.”
ISSB Vice-Chair Sue Lloyd said in an April 28 release that ISSB took steps to “respond in a timely manner by proposing targeted amendments helping preparers where possible, without causing too much disruption and ensuring that our Standards continue to enable the provision of decision-useful information to investors.”
“It is the role of a responsible standard-setter to listen to market feedback from the earliest implementation stages, and to support preparers in the application of our Standards,” Lloyd said.
KPMG U.S. Sustainability Leader Maura Hodge said the proposed amendments display a “pragmatic evolution of climate disclosure standards” and acknowledge the “unique challenges financial institutions face while preserving transparency.”
“By refining scope 3 requirements for derivatives and insurance-associated emissions, the ISSB demonstrates that effective standards must balance ambition with achievability,” Hodge said in emailed comments to ESG Dive Monday.
ISSB has absorbed several ESG reporting organizations, including the Task Force for Climate-related Financial Disclosures, over the past few years. The global standard setter released its inaugural IFRS S1 and S2 reporting frameworks in the summer of 2023.
ISSB’s exposure draft is open for public comment until June 27. The organization said it aims to finalize any amendments by the end of the year, subject to stakeholder feedback.
