Members of an expert advisory group formed to provide crucial input on implementing the International Sustainability Standards Board’s (ISSB) new sustainability rules were broadly positive about preparations to apply the new standards.

But where there are sticking points, the board’s Transition Implementation Resource Group’s inaugural meeting heard last week, they have herded around the reporting of Scope 3 greenhouse gas (GHG) emissions under the Greenhouse Gas Protocol.

Victoria Smith, head of group financial and client reporting at Aviva, said there were “some challenges, particularly for financial institutions, with the scope of the reporting requirements for finance emissions that fall under Scope 3, Category 15” of the Greenhouse Gas Protocol.

Other issues identified during the meeting included financed emissions, emissions accounting, and the linkage between financial and sustainability reporting.

Scope 3, Category 15 is a category of GHG emissions that are associated with a company’s investments. This category is relevant to investors, companies that provide financial services, and other entities with investments not included in Scope 1 or Scope 2.

Investments may be included in a company’s Scope 1 or Scope 2 inventory depending on how the company defines its organisational boundaries. A reporting company’s Scope 3 emissions from investments are the Scope 1 and Scope 2 emissions of investees.

Smith noted, however, that Aviva’s preparations for the new reporting regime were going well – not least given the asset manager’s long-standing experience of sustainability reporting.

Yvonne Kam, a PwC partner and member of the group, agreed that Scope 3 emissions had emerged as a hot-button topic during outreach events with financial services professionals in China.

Meetings of the group, which will serve as a discussion forum for emerging implementation issues with the ISSB’s first two sustainability standards, will be led by ISSB vice chair Sue Lloyd in public sessions.

The ISSB published International Financial Reporting Standard S-1, General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S-2, Climate-related Disclosures, in June of this year.

The new standards take effect from 1 January next year, leaving both preparers and investors with little over a year to grapple with the complexities of the new requirements before companies release their first sustainability reports in 2025.

At the same time, however, the meeting heard, the group will have to tread a careful line between supporting implementation, offering guidance to constituents while not actually changing any requirements in the standards themselves.

The decision to set up a group to support the implementation of a major new IFRS is not new.

In June 2014, the International Accounting Standards Board and its US counterpart formed the Revenue Recognition Transition Resource Group to offer support to preparers adopting the boards’ joint new revenue-recognition accounting standard.

The aim of the new group, the meeting heard, will be to understand what challenges constituents are facing and attempt to avoid diversity in practice.

Staff papers prepared for the group’s meetings will not, however, include a formal recommendation in the same way that the ISSB’s decision-making papers typically do.

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