Skip to main content
Primay navigation
Go home
IFRS Foundation Other Resources:

IIRC responds to FSB Task Force on Climate-related Financial Disclosures

Posted 11 February, 2017

The IIRC responded to consultation on the FSB Task Force on Climate-related Financial Disclosures recommendations on 10 February 2017:

The IIRC welcomes the recommendation that companies should ‘integrate’ their risk management in the face of the threat of climate change, made in the report from the FSB Task Force on Climate-related Financial Disclosures. The IIRC believes that genuine action to combat climate change can only be achieved by extending the disclosure horizon. We are committed to supporting efforts to align the Task Force recommendations with existing attempts to improve corporate governance by extending accountability for the management of multiple, interconnected resources and relationships. The implementation of these recommendations should lead to a fundamental realignment of corporate and investment behaviours and decision-making, as well as acting as a catalyst for a more cohesive and aligned corporate reporting system.

We would also support the production of guidance to promote greater consistency in the preparation and presentation of climate related information. This would allow sufficient time for businesses to adopt the principles.

In our view better practice standards will support the market appropriately to integrate climate related risks and opportunities within their financial filings. It will add credibility and consistency to the scenario-based evaluations, supporting decision-making by providers of financial capital as well as assessment by other capital market participants.

We would emphasise the importance and value of the connectivity of information, to ensure that climate-related disclosures are linked to broader strategic information. This will increase the decision-usefulness of the disclosures from the perspective of providers of financial capital.

We would also support the use of illustrative examples, where they can help to accelerate adoption, particularly by companies in the same or similar sectors and jurisdictions. In terms of the disclosure of metrics more broadly, the International <IR> Framework, itself endorsed by a large coalition of market participants from around the world, states: “Quantitative indicators, such as KPIs and monetized metrics, and the context in which they are provided can be very helpful in explaining how an organisation creates value and how it uses and affects various capitals. The ability of the organisation to create value can best be reported on through a combination of quantitative and qualitative information.” While quantitative indicators are valuable “the ability of the organisation to create value can best be reported on through a combination of quantitative and qualitative information.

The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs promoting communication about value creation as the next step in the evolution of corporate reporting. We would like to make the following additional points to the Task Force:

  1. Inclusion in mainstream financial disclosures: We support the recommendation that material climate-related financial disclosures should be included within mainstream financial filings. The strength of the Task Force’s recommendations is that the disclosure recommended is fully integrated in financial reporting. However, to be fully effective, the IIRC believes the corporate reporting system should enable investors and businesses to understand the inter-relationship between their impact on natural capital and impact on broader value creation. Therefore, Task Force recommendations should be implemented within the context of the objective of realignment of the corporate reporting system, with the aim of achieving more integrated strategic, narrative and financial information providing greater decision-useful insights for providers of financial capital.
  2. Greater emphasis on value-creation as well as financial risk: We believe it would be useful for investors if there is greater emphasis on businesses explaining the opportunities as well as the risks from climate change and the transition to a low carbon future. This is a necessary part of encouraging the new investment required. It also means that the necessary starting point is the strategy of the business, which is a key part of Integrated Reporting. Internal governance processes should be realigned to meet this objective.
  3. Effective risk management: the integration of climate-related risks within the overall risk management processes of a business is an essential element in strengthening corporate governance. This is a key part of the Task Force’s recommendations and should be strongly supported. As the Task Force report establishes, climate risks are multi-dimensional and the multi-capitals approach set out in the International <IR> Framework should be explicitly referenced in implementation.
  4. Alignment of the corporate reporting landscape: the Task Force’s observation that a corporate reporting landscape of multiple disclosure frameworks and standards creates complexity and that the principles outlined in the report should provide an opportunity for greater alignment. It is important to note that the major corporate reporting standard-setters and framework providers in the world have already established the Corporate Reporting Dialogue, with the explicit objective of greater aligning reporting requirements. Several of these organisations jointly met with the Task Force and have agreed to collaborate on the implementation of its recommendations, starting with a joint response to this public consultation. It would be helpful for the Task Force to explicitly acknowledge these developments, which will assist in implementation at a later stage.
  5. The offer of the IIRC movement to support implementation: In addition to our common efforts with other members of the Corporate Reporting Dialogue, the IIRC as a market-led coalition, and having established a principles-based Framework which is now being implemented in over 30 countries worldwide, stands ready to promote the implementation of the Task Force recommendations. In addition to advocacy we will promote best practice and work with local partners to refine practice, engage with regulators and create supportive peer networks.

We would also like to propose the following amendments to the document, Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures:

  1. Please replace all references to “IIRC <Integrated Reporting> Framework” with “IIRC International <IR> Framework”.
  2. In Chapter C – Guidance for All Sectors, Section 5 – Governance table, please replace IIRC paragraphs “3.10, 4.8” with “4.8, 4.9”
  3. In Chapter C – Guidance for All Sectors, Section 5 – Strategy table, please include paragraph 4.27 among the IIRC references in a) and b)
  4. In Chapter C – Guidance for All Sectors, Section 5 – Risk Management table, please insert the IIRC International <IR> Framework, with reference to paragraphs 4.23-4.26
  5. In Chapter C – Guidance for All Sectors, Section 5 – Metrics and Targets table, please include paragraph 3.54 among the IIRC references