A 12 months since launching its inaugural disclosure requirements, which has been adopted by over 20 jurisdictions representing greater than half of the worldwide economic system so far, the Worldwide Sustainability Requirements Board (ISSB) has entered a brand new frontier for sustainability reporting: transition planning disclosures.
On the Worldwide Monetary Reporting Requirements (IFRS) Basis’s annual convention yesterday, ISSB chair Emmanual Faber mentioned that because it takes over the United Kingdom-led Transition Plan Taskforce (TPT)’s duty of creating steerage and sources on making ready local weather transition plans for firms the world over, it’ll search to cut back fragmentation in data disclosed and consolidate present requirements.
“Tlisted here are an increasing number of regulators, firms, traders and banks which can be both requested or need to develop such plans, and it is vitally essential that there’s a method of doing them and never 20 other ways,” mentioned Faber.
“We’ve determined to guide right here, to not wait. [Transition planning disclosure] might be not essential right now, however it could turn out to be essential in six months, in 12 months, in 5 years, and we simply need to be prepared for that future,” he mentioned.
Creating credible transition plans, which entails laying out clear actions to understand their high-level deccarbonisation targets, is seen as more and more necessary. For now, they’re necessary for listed firms within the European Union below the bloc’s company sustainability regulation, and will likely be made necessary for giant companies in Australia come 2025. Within the UK and the USA, proposals to reveal transition plans are at present voluntary for publicly-listed companies to undertake.
Transition plans are essential for entities aiming to cut back emissions and handle local weather dangers. Australia’s new local weather disclosure regime will embody transition plan disclosure necessities beginning January 2025. Treasury will publish greatest observe steerage for these disclosures by the tip of 2025.
TPT launched its last disclosure framework final October and extra sectoral suggestions in April this 12 months. Its framework, which is supposed to be the “gold normal” for personal sector transition plans, intently references the steerage put out by the Glasgow Monetary Alliance for Web Zero (GFANZ) in 2022.
Drawing from these two worldwide pointers, Singapore – one of many first nations in Asia to make ISSB-aligned reporting necessary for listed and huge non-listed companies – additionally revealed one of many world’s first transition planning pointers for monetary establishments final 12 months.
Regardless of the flurry of frameworks which have been put forth over the previous two years, the standard of most company transition plans disclosed final 12 months stays dismal, primarily based on newest evaluation by local weather disclosure non-profit CDP.
In response to its report, whereas the variety of firms disclosing 1.5°C-aligned local weather transition plans jumped by 44 per cent since 2022, solely 0.6 per cent or 140 companies surveyed have what CDP considers to be a “absolutely credible” transition plan, that meets 21 key standards it had listed out.
Asian jurisdictions like Japan and Korea barely outperformed the worldwide common, with 1.6 per cent and 1 per cent of organisations respectively disclosing a reputable transition plan.
ISSB’s climate-related disclosures, also referred to as IFRS S2, at present solely requires an entity to reveal its plans to transition to a lower-carbon economic system, if such data is already accessible. As a part of its two-year work plan to assist the implementation of its reporting requirements, ISSB plans to “streamline and consolidate frameworks and requirements for disclosures about transition plans”, its press launch acknowledged.
Somewhat than “requiring that firms have interaction in transition planning, per se”, ISSB emphasised that it’s going to stick with offering traders “high-quality, decision-useful details about the plans that firms have” to align with IFRS 2’s concentrate on climate-related dangers that impacts an entity’s monetary prospects.
However over time, the ISSB will think about integrating the TPT steerage into its requirements the place related, it mentioned.
Amanda Blanc, TPT’s co-chair and chief govt of British multinational insurance coverage agency Aviva Group welcomed ISSB’s plans to make use of the taskforce’s sources and described it as “an necessary step in direction of higher consistency and readability”.
The ISSB additionally inked contemporary agreements with different main standard-setters just like the Greenhouse Fuel (GHG) Protocol, CDP and the Taskforce for Nature-related Disclosures (TNFD) to additional harmonise disclosures throughout emissions accounting, local weather disclosures and nature-related disclosures.
It additionally reiterated its dedication, first introduced in Might, to ship “full interoperability” with the International Reporting Initiative (GRI) requirements, which continues to be essentially the most widely-used reporting framework throughout all areas.
