Prototype climate-related financial disclosure

Five organisations launch prototype climate-related financial disclosure standard

In December 2020, the Carbon Disclosure Project (CDP), the Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) issued a paper illustrating a prototype climate-related financial disclosure standard.

The paper illustrates how certain components of current frameworks and standards, together with recommendations set out by the Task Force on Climate-related Financial Disclosures (TCFD) can be used together to provide a starting point for developing global standards for sustainability-related financial disclosure.

Figure 1 in the paper illustrates how comprehensive corporate reporting includes three aspects:

  • Sustainability reporting – reports on all sustainability matters that have significant positive or negative impacts on people, the environment and the economy (e.g. type of emissions, source of emission factors, standards methodologies and assumptions and tools used to determine contribution (destruction) to sustainable development)
  • Sustainability-related financial disclosure – reports on sustainability matters that create or erode enterprise value (e.g. trend and scenario analysis of emissions to enable companies and investors to better understand business levers available to change emission levels and impact on enterprise value)
  • Financial accounting and disclosure – already represented as monetary amounts recognised in the financial statements.

The paper shows how the IASB’s Conceptual Framework for Financial Reporting (Framework) is well suited to sustainability-related financial disclosure. It identifies components of the Framework that are common to developing both accounting standards and sustainability-related financial disclosure standards, and recommends specific adaptations for sustainability-related financial disclosure which are illustrated through the prototypes provided for a climate-related financial disclosure standard.

Please refer to the paper for more information.