top of page

What's New in Global Sustainability Reporting? - Latest Updates from IFRS-ISSB

More ESG Research and Insights are Available from GC Insights Contact: for more information.

Transition Relief in IFRS S1

In the latest meeting (April 2023), the IFRS - International Sustainability Standards Board (ISSB) decided to introduce a transition relief in IFRS S1 that would allow an entity to report on only climate-related risks and opportunities (as set out in IFRS S2 Climate-related Disclosures) in the first year it applies IFRS S1 and IFRS S2. The entity would be required to provide information about its other sustainability-related risks and opportunities in the second year it applies the two Standards.

This one-year transition relief would NOT change the effective date of IFRS S1 (IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information). The ISSB decided in February 2023 to require that IFRS S1 be effective for annual reporting periods beginning on or after 1 January 2024. However, for an entity applying for this transition relief in the first year, it applies IFRS S1, the requirements in IFRS S1 would apply only insofar as they relate to the disclosure of climate-related financial information.

This transition relief would have NO effect on the application of or requirements in IFRS S2.

The ISSB also decided that if an entity uses this transition relief, it:

  • would be required to disclose that fact.

  • could extend the previously agreed transition relief in IFRS S1 related to disclosing comparative information such that the entity would not be required to disclose comparative information related to its other sustainability-related financial information in the first year it discloses that information. For the avoidance of doubt, comparative information for climate-related financial information would be required in the second year.

Next steps: The ISSB will continue the balloting process and expects to issue the two Standards towards the end of the second quarter of 2023.

ISSB on Scenaio Analysis

In November 2022, the International Sustainability Standards Board (ISSB) confirmed that companies will be required to use climate-related scenario analysis to inform resilience analysis. The ISSB also agreed to provide application support to preparers including making use of materials developed by the Task Force for Climate-Related Financial Disclosures (TCFD) to provide guidance to preparers on how to undertake scenario analysis. (IFRS)

  • The ISSB will refer to TCFD guidance that sets out types of scenario analysis, including quantitative, partially quantitative, and qualitative. The ISSB agreed that it would build on the TCFD guidance, specifying that scenario analysis must be applied but setting out the required approach that is scalable to an entity’s circumstances.

  • At a minimum, an entity would need to undertake the qualitative form of scenario analysis as a basis for its resilience analysis.

  • The ISSB will provide guidance on which climate scenarios an entity should use, depending on their circumstances, including industry and country exposure, to provide relevant information to investors. This guidance will specify where the inclusion of a Paris-aligned scenario may be relevant.

  • To assist preparers the ISSB will also acknowledge in its guidance within the Standard that 'off-the-shelf scenarios' such as those of the Network for Greening the Financial System (NGFS) may be useful resources for companies.

The above will be developed in the final IFRS Sustainability Disclosure Standard S2—Climate-related Disclosures including through guidance issued with the Standard.

Scenario analysis is a strategic planning tool to help an organization understand how it might perform in different future states. It is designed to embrace complexity and uncertainty, allowing decision-makers to evaluate the organization’s flexibility, resilience, or robustness across a range of potential outcomes. Scenario analysis is not designed to produce rigid predictions nor irrational futures but is designed to consider possible and plausible alternative futures. Scenario analysis focuses on a range of forward-looking variables or pathways rather than historic data. Crucially, scenario analysis not only identifies potential risks but can also offer insight into opportunities including energy efficiency, changes in energy sources and/or technologies, new products and services, new markets or assets, and increased resilience. (CDP)

Key Takeaways for Businesses Preparing to Apply Climate Risk Assessments

The Task Force for Financial Disclosures (TCFD) divided climate-related risks into two major categories: Risks related to the transition to a lower-carbon economy (i.e. Transition Risks) and Risks related to the physical impacts of climate change (i.e. Physical Risks)

Climate-related risks are increasingly being recognized by policymakers and business leaders as material financial risks, and financial institutions and corporates need to take appropriate measures to manage these risks and provide transparent disclosure.

There are six main broad climate risk assessment approaches, of which scenario analysis has been one of the most popular choices as TCFD recommendations and the growing sophistication of models and metrics. In November 2022, the International Sustainability Standards Board (ISSB) confirmed that companies will be required to use climate-related scenario analysis to inform resilience analysis.

The Intergovernmental Panel on Climate Change (IPCC), The Network of Central Banks and Supervisors for Greening the Financial System (NGFS), the International Energy Agency (IEA), and Principles for Responsible Investment's Inevitable Policy Response (UN PRI’s IPR) are some of the most cited scenario providers. Their scenarios have been updated recently to incorporate the latest developments and trends for a warmer world. When conducting climate scenario analysis, decision-makers ought to consider the most updated models even when their assessment timeframe differs in order for the most relevant strategies to take form.

In addition, the above scenarios are often provide cross-sectoral insights, while certain climate risk assessment requires sectoral-specific materiality data to assess its exposures to climate risks. Sectoral-specific metrics and models could be more useful when assessing and managing sectoral-specific climate risk exposures. Companies are tasked to develop strategies for reducing their carbon footprint, minimizing carbon-related costs, and capitalizing on new business opportunities that arise from low-carbon industries' growth.

This report has included an introduction to policy-related transition risks, which has expanded its reach and coverage domestically and across borders. The likely scenarios for policy-related climate risks in 2023 and beyond are brought by more ambitious and integrated policies that prioritize climate action and sustainability, increased focus on social equity and climate justice, deeper collaboration and innovation across sectors and countries, and potential conflicts and trade-offs between different policy objectives and stakeholders. GC Insights’s subscription services have prepared to track and help businesses assess their transition risks, providing guidance to interpret the climate risk profiles of your assets and holdings.

Table of Contents

The Fundamentals of Climate Risks

Policy Responses to Increasing Climate Risks

Broad Risk Measurement Approaches

ISSB on Scenario Analysis

Scenario Providers

Key Considerations for Assessing Climate Risks

Case Study: ECB Portfolio Disclosure Framework

Example of Sector-Specific Climate Risk Assessment

Policy-Related Climate Transition Risks

Contact us to learn more details on climate risk assessments and reporting on ESG, ISSB, and other sustainability-related frameworks.

bottom of page