In a move to simplify the disclosure landscape for companies and investors, the IFRS Foundation has published a comprehensive comparison of the requirements in IFRS S2 Climate-related Disclosures and the Task force on Climate-related Financial Disclosures (TCFD) recommendations. This comes after the Financial Stability Board announced the completion of the TCFD’s work, with the ISSB Standards marking the culmination of their efforts.
The comparison highlights that the requirements in IFRS S2 align with the four core recommendations and eleven recommended disclosures put forward by the TCFD. This means that companies adhering to the ISSB Standards will automatically meet the TCFD recommendations, eliminating the need for dual compliance.
However, the IFRS S2 also introduces additional requirements not covered by the TCFD recommendations. These include industry-based metrics disclosure, information about companies’ planned use of carbon credits to achieve net emissions targets, and further details about their financed emissions.
Despite the completion of the TCFD’s work, companies still have the option to utilize their recommendations should they wish to do so. The TCFD remains an excellent entry point for companies transitioning to the ISSB Standards.
The incorporation of the TCFD recommendations into the ISSB Standards is seen as a significant step towards simplifying the complex web of sustainability reporting initiatives, often referred to as the ‘alphabet soup.’ By building on the legacy of the TCFD, the ISSB aims to raise the standard and quality of climate-related disclosures.
Furthermore, the Financial Stability Board has requested the IFRS Foundation to take over the monitoring of companies’ progress in climate-related disclosures from the TCFD, ensuring continued oversight and improvement.
With the finalization of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2, the efforts to reduce fragmentation in the disclosure landscape have been significantly advanced. However, it is essential to note that existing standards and frameworks have not disappeared overnight. Companies and investors are now in a more streamlined and coherent disclosure landscape, thanks to the alignment of the ISSB with the TCFD’s recommendations. Click here for the comparison document.