The International Sustainability Standards Board (ISSB) yesterday issued amendments to its IFRS S2 Climate-related Disclosures rule book. The changes address three key areas of concern raised by stakeholders – including a lack of clarity surrounding Scope 3 emissions.
ISSB vice chair Sue Lloyd said: “It is the role of a responsible standard-setter to listen to market feedback from the earliest implementation stages, and to support preparers in the application of our standards.”
The problem areas include the reporting of Scope 3 Category 15 greenhouse gas emissions, the application of global warming potential (GWP) values, and the use of industry classification systems for financed emissions.
The ISSB’s decision to issue the exposure draft proposing the amendments stems directly from feedback received during the ongoing implementation of IFRS S2 and its companion standard, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information.
Feedback from the board’s engagement with stakeholders through its Transition Implementation Group and other channels identified practical challenges companies are encountering in applying the standards.
The ISSB published its two foundational sustainability standards, covering general reporting requirements and climate change in June 2023.
Stakeholder concerns aired
The issues were explored during a September 2024 meeting of the board’s Transition Implementation Group. Staff subsequently presented an analysis of the three problem areas to another ISSB meeting held on 20 November.
During that meeting, Lloyd said it was “really important for me in terms of the messaging that comes through in the exposure draft […] we’re not really deliberating whether or not we made good decisions in the past”.
ISSB member Bing Liu warned, however, that it was important to manage the risk to the board’s reputation when handling the issues, noting that in the longer term “the only way for us is to amend to avoid further reputation[al harm]”.
Addressing inconsistency, allowing optionality
In relation to Scope 3 Category 15 Emissions, the ISSB proposes allowing entities to limit their reporting of these emissions (which include emissions from derivatives, facilitated emissions, and insurance-associated emissions) to only financed emissions (those attributed to loans and investments), according to the exposure draft.
During the board’s January meeting, staff member Dianora Aria de Marco said: “The challenge that we have is that objectively reading the standard, [it] is not clear that this was the board’s intention [on Scope 3 Category 15 Emissions].”
The board proposes allowing entities to use GWP values other than those specified by the ISSB – but only if a jurisdictional authority or exchange requires the use of different values, the draft added.
Finally, the ISSB wants to give entities flexibility beyond the Global Industry Classification Standard when classifying counterparties to disaggregate financed emissions information.
The ISSB said it is aiming to finalise the amendments by the end of this year. Interested parties have until 27 June 2025 to make their views known to the ISSB.
The latest digital edition of IPE’s magazine is now available
No comments yet