IFRS Foundation
International Sustainability Standards Board Proposes Amendments to Ease Compliance Burden of International Financial Reporting Standards’ Climate-Related Disclosures
The International Sustainability Standards Board (ISSB) published an Exposure Draft with proposed amendments to its climate-related disclosures standards (IFRS S2 Standards) on April 28. The targeted amendments are designed to provide relief on greenhouse gas emission (GHG) disclosures in the IFRS S2 Standards that would make it “easier for companies to apply the Standards.” The ISSB proposal would provide companies with relief on disclosure of Scope 3 GHG emissions related to derivatives and some financial activities; reduce the requirement to use the Global Industry Classification Standards (GICS) in “disclosing disaggregated financial emissions information” for certain circumstances; permit jurisdictional leeway to use different measurement methods for GHG emissions tracking other than the Greenhouse Gas Protocol; and permit the use of “jurisdiction-required Global Warming Potential (GWP) that [is] not from the latest Intergovernmental Panel on Climate Change (IPCC).” GWP is a data system to comparatively evaluate the different global warming impacts of different GHGs; the ISSB’s amendments would permit those reporting against IFRS S2 to use the GWP system required in their jurisdiction, even if it differs from the global standard set by the Intergovernmental Panel on Climate Change. The ISSB will accept comments on its Exposure Draft until June 27 and intends to finalize the amendments by the end of 2025.
GRI
Global Reporting Initiative and Global Sustainability Reporting Board Request that European Union Align Sustainability Reporting Standards with Global Practices
The CEO of the Global Reporting Initiative (GRI) and the Chair of the Global Sustainability Reporting Board (GSRB) wrote a joint letter to the European Financial Reporting Advisory Group (EFRAG) on May 8 to request that the EU align its European Sustainability Reporting Standards (ESRS) burden reduction with GRI Standards. The GRI and GSRB letter responds to EFRAG’s request for input on its mandate to “significantly reduce the required disclosures in the ESRS as part of the Omnibus legislative changes to the Corporate Sustainability Reporting Directive (CSRD)” (for more information on the European Commission’s Omnibus proposal, see March Newsletter). The GRI and GSSB state that by limiting ESRS datapoints to just the datapoints included in the GRI Standards, EFRAG could produce a burden reduction of over 30%, without compromising on the availability of decision-useful sustainable information or the global interoperability of sustainable disclosures. GRI also published a Q&A document to support stakeholders trying to understand the impact of the Omnibus proposal on GRI reporting in the EU.
GRI Opens Consultation on Updating Sector Reporting Standards
GRI proposed updates to several of its Sector Standards on May 15 to bring the standards’ disclosures and terminology in line with the latest GRI Topic Standards. The GRI amendments would cover the Oil and Gas (GRI 11), Coal (GRI 12), Agriculture, Aquaculture and Fishing (GRI 13), and Mining (GRI 14) Sector Standards; GRI’s proposal would bring “material topics, topic statements and descriptions, and reporting expectations related to biodiversity, climate, and energy in the sector standards” in line with the recent Biodiversity, Climate Change, and Energy Topic Standards. GRI is accepting feedback on the proposed updates until July 12.
BIS
Bank of International Settlements Outlines Upcoming Climate-Related Projects
The Governors and Heads of Supervision (GHOS) at the Bank of International Settlements (BIS) met on May 12 to discuss ongoing projects related to Basel III, disclosure of climate-related financial risks, and analysis of the financial risk of extreme weather events. The BIS confirmed in its May meeting that it will soon publish a voluntary disclosure framework that builds off BIS’ Pillar 3 disclosure framework for climate-related financial risks, first proposed in 2023. The GHOS also tasked BIS’ Basel III Committee with “prioritizing its work to analyze the impact of extreme weather events on financial risk.”
Japan
Ernst & Young Publishes Commissioned Report on Climate Scenario Analysis in Japan
Ernst & Young ShinNihon LLC (EY) published a report on April 28 commissioned by the Japanese Financial Services Agency (JFSA) covering the status of climate-related scenario analysis in Japan. The EY report examines how Japan’s “leading financial institutions” are implementing the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations on scenario analysis; how scenario analysis implementation differs by financial sector in Japan; and how financial institutions have implemented transition planning. The EY study also looks at non-Japanese financial institutions as a reference point for scenario analysis and transition plan implementation.
Australia
Australian Sustainable Finance Institute Hosts Launch Webinar on 2025-2027 Action Plan
The Australian Sustainable Finance Institute (ASFI) hosted a webinar to mark the official launch of its Sustainable Finance Action Plan 2025-2027 on May 15. The 2025-2027 Action Plan recaps ASFI’s progress in promoting sustainable finance goals originating from the 2020 Australian Sustainable Finance Roadmap and outlines ASFI’s upcoming policy priorities and initiatives (for more information on the 2025-2027 plan, see April Newsletter). ASFI invited speakers from the Investor Group on Climate Change (IGCC), the Principles for Responsible Investment (PRI), the Responsible Investment Association Australasia (RIAA), and the Australian Council of Superannuation Investors (ACSI) to speak at the webinar.
EU
European Securities and Markets Authority Opens Consultation on Technical Standards for the EU ESG Rating Regulation
The European Securities and Markets Authority (ESMA) published its draft Regulatory Technical Standards (RTS) under the EU ESG Rating Regulation on May 2. The ESMA draft RTS cover conflicts-of-interest mitigation requirements for ratings providers; mandatory disclosures on ESG ratings to the public, rated items or issuers, and users; and information that ratings providers should include in their applications for supervision by ESMA. ESMA will receive feedback on its draft RTS until June 20 and aims to publish the final RTS by October 2025.
European Banking Authority Publishes ESG Dashboard to Expand Access to Climate Risk Indicators in the Banking Sector
The European Banking Authority (EBA) unveiled its ESG dashboard on April 25 which, per the announcement, “establishes a broader ESG risks monitoring framework and allows centralised access to comparable climate risk indicators.” The ESG dashboard compiles banks’ Pillar 3 ESG disclosures and is thereby designed to enable benchmarking, assessments, and monitoring of climate risk across the EU/EAA banking sector. The EBA dashboard is designed to cover the banking sector’s exposure to climate-related transition and physical risks and provides key indicators for EU Taxonomy alignment and exposure to immovable property collateral.
European Banking Authority Publishes First Part of its 2024 Annual Report
The EBA published on May 20 the first part of its 2024 Annual Report, which covered the EBA’s contributions to the European Green Deal. As part of its 2024 activities, the EBA continued “advancing sustainable finance integration [by] issuing guidelines and reports on ESG risks, greenwashing and scenario analysis.” The EBA Annual Report also emphasizes the “one-off climate risk stress test” that the EBA conducted to examine the EU financial system’s resilience in case of certain climate scenarios.
European Financial Reporting Advisory Group Sends European Commission Workplan for ESRS Simplification
The European Financial Reporting Advisory Group (EFRAG) delivered a publicly available Work Plan to the European Commission (the Commission) on April 25 covering how EFRAG will deliver on its mandate to simplify the ESRS. The EFRAG Secretariat and the EFRAG Sustainability Reporting Board (SRB) worked jointly on producing a strategy to effectively simplify the ESRS without reducing their practicality or effectiveness. The Work Plan covers EFRAG’s key activities, deliverables, and stakeholder engagements as it seeks to fulfill the Commission’s mandate by an October 31 deadline. As part of its Work Plan, EFRAG revealed that it plans to release Exposure Drafts on ESRS simplification for public consultation “between the end of July and early September.”
EFRAG Consults on IFRS 18 Financial Reporting Standards
EFRAG submitted to the European Commission on May 6 its official endorsement advice on IFRS 18 Presentation and Disclosure in Financial Statements Standards. IFRS 18 aims to “improve the usefulness of information presented and disclosed in financial statements” by introducing “new requirements for information presented in the primary financial statements and disclosed in the notes.” Following stakeholder feedback, EFRAG supported the endorsement of IFRS 18 and concluded that the new standard “meets the technical criteria for endorsement” and “would be conducive to the European public good.” EFRAG’s endorsement advice came in response to a formal letter from the Commission asking EFRAG whether the new IFRS standard should be adopted.
EFRAG and Japanese Reporting Boards Meet to Discuss Sustainable Finance Cooperation
Representatives from EFRAG met privately with leadership from the Accounting Standards Board of Japan (ASBJ) and the Sustainability Standards Board of Japan (SSBJ) on May 14-16 to discuss accounting and sustainability disclosure standards in both jurisdictions. EFRAG, ASBJ, and the SSBJ discussed the ongoing need for “alignment and interoperability with [the] IFRS Sustainability Disclosure Standards,” as well as EFRAG’s approach to the simplification of the ESRS in response to the EU Omnibus proposal.
European Central Bank Publishes Opinion on Commission’s Omnibus Proposal
The European Central Bank (ECB) published an “initiative opinion” on May 8 which commented on the Commission’s Omnibus proposal to simplify the EU’s sustainable disclosure framework. The ECB’s opinion included technical suggestions on how to simplify sustainability legislation without compromising on the “availability of harmonized, standardized and reliable sustainability information.” The ECB’s suggestions for the simplification of the Corporate Sustainability Reporting Directive (CSRD) include introducing a medium-large category of companies who would be mandated to disclose against simplified reporting standards; mandating all significant credit institutions remain in-scope of reporting requirements; ensuring large companies can still request data necessary for reporting from companies in their value chains; maintaining certain key data points in the ESRS, as well as sector-specific reporting standards; and adopting limited assurance guidelines. The ECB opinion also includes recommendations for the simplification of the Corporate Sustainability Due Diligence Directive (CSDDD). The ECB recommends the Commission clarify that companies in scope of the regulation must adopt and implement transition plans. Moreover, the ECB advocates for the maintenance of a review clause in CSDDD that would require the Commission to examine whether it should impose financial sector-specific due diligence rules and advocate for the review timeline for such rules to be extended.
UK
Prudential Regulatory Authority Publishes Consultation Paper on Supervisory Expectations for Banks’ and Insurers’ Climate-Related Risk Management
The UK Prudential Regulatory Authority (PRA), a body within the Bank of England that is charged with the supervision of over 1,500 financial institutions, opened a consultation on April 30 regarding its supervision of climate risk management. The PRA’s paper outlines its supervisory expectations for insurance companies’ and banks’ identification, management, and governance of physical and transition climate risks. The PRA paper does not set out strict rules and requirements for banks and insurers. The PRA’s consultation paper covers its supervisory expectations across seven focus areas: governance, risk management, climate scenario analysis, data, disclosures, banking-specific issues, and insurance-specific issues. The PRA is accepting feedback on their consultation until July 30.
US
Securities & Exchange Commission to Host Roundtable on Executive Compensation Disclosure
The U.S. Securities & Exchange Commission (SEC) announced on May 16 that it will host a roundtable on June 26 to examine disclosure requirements related to executive compensation. The SEC roundtable will be hosted in the agency’s headquarters and will be open to the public. SEC Chairman Paul Atkins announced that the upcoming Roundtable will focus on whether the “complex and lengthy” executive compensation disclosure requirements “provide investors with additional information that is material to their investment and voting decisions,” as well as whether current disclosure requirements are cost-effective. Chairman Atkins’ announcement also included nine questions for SEC staff to consider in preparation for the Roundtable: the questions examine the content and formatting of current corporate executive compensation disclosure requirements. The SEC will announce the agenda and speakers of the roundtable closer to the event.
By:
Noam Cherki, Associate, Regulatory Affairs & Public Policy, ISS STOXX
Hugo Gallagher, Senior Associate, Regulatory Affairs & Public Policy, ISS STOXX
Karina Karakulova, Director of Regulatory Affairs & Public Policy, ISS STOXX
