IASB begins climate-related risk project
March 28, 2023
The International Accounting Standards Board (IASB) has begun evaluating how companies can improve their climate-related risk reporting.
The new project, launched under the purview of the International Financial Reporting Standards Foundation (IFRS), will focus on how such risks are detailed within companies’ financial statements.
This work will complement that of the IASB’s sister board, the International Sustainability Standards Board (ISSB), which was set up in 2021 to develop a global baseline around this very topic.
The IASB will now specifically set out to determine if the IFRS should be doing more in its work around climate-related risks.
Several stakeholders have already raised concerns with the IFRS, claiming climate-related risks are often perceived as so remote and long-term that they are challenging to articulate within financial statements.
Specifically, it was also flagged that investors need better qualitative and quantitative data about the impacts of climate-related risks on both assets and liabilities.
“We will start this project by exploring, through research and outreach, the nature and causes of stakeholder concerns about the reporting of climate-related risks in the financial statements,” wrote IASB chair Andreas Barckow, in an article announcing the project,
He added: “By better understanding the causes of those concerns, we can be more informed about appropriate actions to take.”
The new work from the IASB has been classified as a ‘maintenance project’ by the ISFR which means it will be narrow in scope – resulting in only minor amendments to current standards, limited new application guidance, or new illustrative examples.
The ISSB is expected to publish the first two IFRS Sustainability Disclosure Standards, which will address general sustainability factors and climate respectively, in June of this year. These will come into effect from January 2024.
Both a lack of transparency and standardisation have been widely identified by investors as challenges to ESG integration.
Therefore, efforts toward international harmonisation of reporting standards have been welcomed by investors.
Last year, the IFRS signed an agreement with the Global Reporting Initiative (GRI) to align both parties’ sustainability disclosure and reporting standards.
Last Updated: 28 March 2023