Climate-related Matters

The IASB has activated a pipeline maintenance project ‘Climate-related Risks in the Financial Statements’, after noting in its Feedback Statement on the Third Agenda Consultation that stakeholders had commented on inconsistent application of IFRS Accounting Standards to climate-related risks; and that there was insufficient information disclosed about climate-related risks in the financial statements.

The ISSB is currently developing a Request for Information (RFI) to inform its initial two-year work plan. As at March 2023 the IFRS Foundation website indicated that the ISSB RFI will be issued in May 2023. The approach will include both foundational work, which will build on draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (S1) and draft IFRS S2 Climate-related Disclosures (S2), and potential research and standard setting projects.

Project Objectives

The research project is consistent with the UKEB’s statutory functions as well as the request for additional work on connectivity by the Government. In addition, the evidence gathered will help the UKEB to obtain insight on the UK companies’ existing experience of reporting on climate-related matters.This will help the UKEB provide evidence-based responses to both the IASB, on its project on climate-related risks in financial statements, and to the ISSB, on its RFI on its future agenda setting.The objective of the research is to develop a body of evidence, using FTSE 350 annual reports to identify disconnects between TCFD and SECR narrative disclosures in the front half of the annual report and the disclosure of the associated financial effects in the financial statements.

Project Outcomes

The project will deliver:

• A reference document containing a high-level summary of the key findings from recent research regarding issues identified in the reporting of climate-related risks in financial statements. The document will also identify potential further areas for focussed UKEB research.
• A report including the following:
  • an analysis of the connectivity gaps identified and the extent to which the cause may be due to incongruence between accounting standards and the requirements of TCFD.
  • the potential impact of the adoption of draft IFRS S1 and draft IFRS S2 on those gaps.
  • a summary of stakeholder views obtained from UKEB working and advisory groups.