9 Items for Noting

Appendix A: Technical Advisory Committee Update

Project Type: Monitoring Project Scope: Limited

Purpose of the paper

This paper provides an update on 13 May 2025 UK Sustainability Disclosure Technical Advisory Committee (TAC) meeting. The TAC discussed a draft due process policy; amendments proposed the Exposure Draft (ED) Amendments to Greenhouse Gas Emissions Disclosures¹ to IFRS S2 Climate-related Disclosures (IFRS S2) and a draft project plan to provide a comment letter to the International Sustainability Standards Board (ISSB) on the ED.

Summary of the Issue

The TAC has been tasked by the Department for Business and Trade² (DBT) to assess the IFRS Sustainability Disclosure Standards from a technical perspective and provide advice³ to the Secretary of State on whether their endorsement would be conducive to the long-term public good in the UK.

On 18 December 2024 the Committee concluded⁴ that the endorsement of both IFRS S1 and IFRS S2, including their proposed amendments, would be conducive to the long-term public good in the UK. The TAC will continue to meet monthly during 2025 (refer Appendix A).

The UKEB is represented on the Committee by a Board Member, who is appointed as a full member to reflect the need to maintain connectivity between UK adopted international accounting standards and UK Sustainability Reporting Standards.

This paper presents a summary of matters considered at the May 2025 meeting, relevant to the UKEB remit. At the time of writing, official minutes had not been issued.

Question for the Board

n/a

Recommendation

n/a - noting only

Appendices

Appendix A: UK Sustainability Disclosure TAC 2025 meeting schedule

TAC meeting – May 2025

1The TAC Secretariat will publish an official record of the meetings and decisions in due course. A summary of the meeting and agenda items is noted below for information.

General Reporting Update5

2The TAC noted a paper that summarised International Sustainability Standards Board (ISSB) meetings and jurisdictional developments in relation to the adoption of IFRS Sustainability Disclosure Standards.

Draft TAC Due Process policy6

3The TAC Terms of Reference (ToR) require the Committee to determine its Due Process policy within 12 months of the approval of the ToR. The members considered a draft Due Process policy which covered the TAC's influencing activities, development of comment letters and the development of its endorsement advice to the Secretary of State.

4The members approved the draft policy, subject to their final comments and authorised the Chair to resolve any edits arising from those comments. The document will be published on the FRC website in due course.

IFRS S2 amendments project plan and approach7

5The International Sustainability Standards Board (ISSB) published the Exposure Draft which proposes targeted reliefs to ease application requirements related to the disclosure of greenhouse gas (GHG) emissions in IFRS S2. The ISSB deadline for stakeholder comments is 27 June 2025.

6To determine whether the amendments are conducive to the long-term public good in the UK the TAC Secretariat will assess if:

1. the proposed amendments are likely to result in an improvement in the international comparability of sustainability-related reporting in the UK;
2. use of the amended version is likely to support companies in making disclosures that are understandable, relevant, reliable and comparable;
3. use of the amended version is likely to improve the quality of corporate reporting within the UK in the long-term; and
4. companies are likely to be able to provide the disclosures required by the amended version within the timeframes that a company normally reports without undue cost or effort.

7It was noted that the project was considered of limited scope and that the TAC Secretariat intended to present a final comment letter to the ISSB for the TAC's approval at its 10 June meeting.

8Stakeholder outreach approach was proposed as identifying key stakeholders and engaging them via interviews and roundtables and desk-based research analysis on Partnership for Carbon Accounting Financials (PCAF) signatories. Following outreach, the TAC Secretariat would then prepare a Draft Comment Letter to the ISSB for the TAC to consider and finalise at the 10 June meeting.

9The TAC considered the proposed project approach and plan. It was noted that while the timeline was challenging, earlier outreach and TAC discussions would support the approach. The TAC approved the project plan.

Proposed amendments to IFRS S2 – Greenhouse gas emissions measurement and disclosures8

10The TAC discussed the targeted amendments proposed for IFRS S2 relating to the measurement and disclosure of greenhouse gas emissions.

11In relation to the proposed reliefs from the use of the Global Industry Classification Standard (GICS) in specific circumstances when disaggregating financed emissions, a potential conflict with financial reporting principles was noted.

12For example, it was noted in the TAC meeting papers that where an entity's subsidiary used GICS the overall reporting entity would be required to use GICS for its consolidated sustainability-related information i.e. the reporting policy of a subsidiary would override the group's sustainability reporting policy. In contrast, financial reporting requires consistent accounting policies applied across a group’s consolidated accounts i.e. subsidiary accounts are adjusted for consolidation purposes. It was noted that this difference in approach may reduce the ability of users to connect relevant information across general purpose financial reporting.

13The Basis for Conclusions⁹ noted that a few ISSB Board members had expressed concerns regarding possible legal and cost implications of the requirement to use GICS where it was only used in part of an entity.

14The TAC considered the amendments proposed by the ISSB and concluded that its original recommendation advice remained appropriate. That advice¹⁰ was as follows '...the financed emissions requirements in IFRS S2 are amended so that entities are not required to use GICS when disaggregating gross financed emissions by sector/industry classification but might use GICS or a different classification system they use for existing regulatory or financial reporting purposes'.

Appendix A: UK Sustainability Disclosure TAC meeting schedule

A1.UK Sustainability Disclosure TAC meetings in 2025 are scheduled as follows:

1. 14 January – link to meeting summary.
2. 11 February - The TAC met in private on 11 February and held confidential informational sessions on upcoming workstreams and to discuss related administrative matters. No minutes issued.
3. 25 March - The private TAC meeting scheduled for 25 March was cancelled due to illness and rescheduled to 15 April.
4. 15 April - The TAC met in private on 15 April, to hold confidential informational sessions on upcoming workstreams and to discuss related administrative matters. No minutes issued.
5. 13 May – awaiting summary minutes.
6. 10 June
7. 8 July
8. 16 September
9. 14 October
10. 11 November
11. 9 December

A2.The public meeting agenda, technical papers and summary minutes from the TAC meetings can be found on the UK Sustainability Disclosure Technical Advisory Committee website¹¹.

Appendix B: Sustainability Update

ISSB meetings

March 2025

B1.The International Sustainability Standard Board (ISSB) met via video conference on 19-20 March 2025. Biodiversity, ecosystems and ecosystem services (BEES) research and Human Capital research were discussed again as well as a standard setting project update on Enhancing the SASB Standards.

B2.The ISSB further discussed the impacts BEES¹² and Human Capital¹³ could have on an entity's prospects, particularly its cash flows, access to finance and cost of capital over different time periods. The ISSB also discussed the present state of disclosures on these areas.

B3.The ISSB also discussed¹⁴ an approach to the development of the amendments for SASB Standards prioritised for enhancement. The prioritised standards include the eight SASB Standards in the Extractives sector, and the Processed Foods SASB Standard. The ISSB considered the publication of these topics as Exposure Drafts at the end of Q2 2025.

B4.The other three priority SASB Standards, the Electric Utilities & Power Generators, the Agricultural Products and the Meat, Poultry & Dairy SASB Standards are expected to be published as Exposure Drafts in Q4 2025. The ISSB was not asked to make any decisions.

April 2025

B5.The ISSB met in Frankfurt, Germany on 9 April 2025. The topics discussed were research projects on BEES and Human Capital.

B6.The ISSB discussed a summary of findings from the initial phases of its research regarding the risks and opportunities associated with BEES¹⁵ and Human Capital¹⁶. It was noted that investors were at an early stage of their consideration of BEES-related information and had a high level of interest in how Human Capital affected investment risk and return. The ISSB was not asked to make any decisions.

Other ISSB updates

B7.The ISSB has published¹⁷ an Exposure Draft (ED) proposing targeted amendments to greenhouse gas (GHG) emissions disclosures required by IFRS S2. The ED aims to provide reliefs to ease specific application challenges related to the disclosure of GHG emissions. The proposed amendments include:

1. relief from measuring and disclosing Scope 3 Category 15 GHG emissions associated with derivatives and some financial activities;
2. relief from the use of the Global Industry Classification Standard (GICS), in some circumstances, in disclosing disaggregated financed emissions information;
3. clarification of the jurisdictional relief to use a measurement method other than the Greenhouse Gas Protocol for measuring GHG emissions; and
4. permission to use jurisdiction-required Global Warming Potential (GWP) values that are not from the latest Intergovernmental Panel on Climate Change (IPCC).

B8.The comment period closes on 27 June 2025. The UK Sustainability Disclosure Technical Advisory Committee (TAC) will discuss a response to the ED at their 13 May 2025 meeting.

B9.The ISSB launched¹⁸ a Roadmap Development Tool to support jurisdictions to plan and design an adoption roadmap.

IFRS Foundation

B10.The IFRS Foundation and the Taskforce on Nature-related Financial Disclosures (TNFD) signed¹⁹ a Memorandum of Understanding (MoU) to share research, knowledge and technical expertise. The MoU will inform the ISSB's BEES initiative and enhancements to the relevant SASB standards.

UK updates

B11.The TAC met²⁰ in private on 15 April 2025. The Committee discussed upcoming workstreams and related administrative matters. The TAC also met on 13 May 2025.

B12.The Environmental Audit Committee (EAC), a UK parliamentary committee, published a report²¹ on the role of natural capital in the UK's green economy. One of the recommendations of the EAC was that the Government should 'consult on measures to increase compliance as a market driver, potentially through expanding Biodiversity Net Gain (BNG) requirements or mandating corporate disclosure of nature-damaging activities.'

B13.The Department for Energy Security and Net Zero proposed²² the establishment of a global framework to build trust and confidence in carbon and nature credit trading. The proposals in the consultation align with the UK government's new approach to ensure regulation supports growth.

B14.ACCA and Adam Smith Business School published a research report²³ regarding accounting for carbon-related instruments. The authors noted that disjointed information potentially impairs connectivity between financial statements and the rest of the information in annual reports. The authors acknowledged contributions from members of the UKEB Secretariat.

B15.The Institute of Chartered Accountants of Scotland (ICAS) published a research report²⁴ on materiality assessments in Corporate Sustainability and Financial Reporting. The authors noted inadequate transparency of the materiality assessment process, inconsistent approaches to determining materiality assessments and misalignments between corporate governance and environmental issues.

European and international updates

B16.The European Financial Reporting Advisory Group (EFRAG) published a public consultation on proposed amendments to the ESRS, known as the Omnibus proposals, with a feedback deadline of 6 May 2025. This follows a European Commission mandate to EFRAG to provide technical advice on simplifying ESRS. EFRAG approved its workplan for this mandate on 25 April 2025.

B17.The US Securities and Exchange Commission voted²⁵ to end its defence of the rules requiring climate-related disclosures.

B18.Greenhouse Gas Protocol announced²⁶ five new Observing Entities (Carbon Disclosure Project (CDP), EFRAG, Global Reporting Initiative (GRI), International Sustainability Standards Board (ISSB) and the Science Based Targets initiative (SBTi)) to its Independent Standards Board.

B19.The Chartered Accountants Australia and New Zealand (CA ANZ) published²⁷ a research report highlighting the effects of climate-related risks on financial statements. The research identified common areas of climate risk disclosure with asset impairment, critical accounting estimates and estimates of the useful lives of assets.

Appendix C: Due Process Compliance Statement: Amendments to IFRS 9 and IFRS 7—Amendments to the Classification and Measurement of Financial Instruments

Project preparation

Desk-based research

Outreach

Project finalisation and project closure

Ongoing communications

Conclusion

This project complies with the applicable due process steps, as set out in the Handbook (published December 2022).

Appendix D: Due Process Compliance Statement: Proposed Amendments to the IFRS Foundation Due Process Handbook

The Trustees of the IFRS Foundation published the Exposure Draft Proposed Amendments to the IFRS Foundation Due Process Handbook²⁹ on 19 December 2024. The IASB comment period ended on 28 March 2025.

Influencing process

Project preparation

Desk-based research

Outreach

Draft Comment Letter (DCL)

Project finalisation and project closure

Ongoing communications

Conclusion

This project does not respond to a paper issued by either the IASB, ISSB or IFRIC. Therefore, it is not specifically covered by the UKEB's Due Process Handbook.

However, this project complies with the applicable due process requirements for technical influencing projects, as set out in the December 2022 Handbook, with one slight variation: the UKEB did not publish a Draft Comment Letter (DCL). Instead, the Board agreed a list of the main points to be proposed for inclusion in the Comment Letter.

The list of 'Points proposed for inclusion in the UKEB Comment Letter' was published on the UKEB website project page, highlighted to stakeholders via a News Alert, and emailed to members of the UKEB advisory and working groups for comments and views.

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Footnotes