By IASB Chair Andreas Barckow
At its March 2023 meeting, the International Accounting Standards Board (IASB) started a project to explore whether and how companies’ financial statements can provide better information about climate-related risks. This project and the work of our sister board, the International Sustainability Standards Board (ISSB), complement each other and illustrate how the work of the two boards is connected. In this article, I will take a closer look at the project and how it relates to the work of the ISSB.
IFRS Accounting Standards require companies to consider climate-related matters in their financial statements when the effect of those matters is material information for investors. We have highlighted these requirements in:
So if companies are already required to consider climate-related matters in their financial statements, why is the IASB starting a project on this topic? Our reasons for taking on this project are based on what we heard in our Third Agenda Consultation. Respondents to that consultation told us:
For example, some stakeholders have asked:
In response to stakeholder feedback, the IASB decided to undertake a maintenance project on Climate-related risks in the Financial Statements to determine whether it should do more in this area. We will start this project by exploring, through research and outreach, the nature and causes of stakeholder concerns about the reporting of climate-related risks in the financial statements.
By better understanding the causes of those concerns, we can be more informed about appropriate actions to take. Causes of those concerns could include:
The outcomes of this project will depend on the causes of stakeholder concerns. This is a maintenance project, so any outcomes will be narrow in scope—for example minor amendments to IASB Standards, limited new application guidance or new illustrative examples. We could also decide to publish further educational materials.
This project will not seek to:
This project and the work of the ISSB complement each other in facilitating connectivity in general purpose financial reports.
Both financial statements—applying the IASB’s Standards—and sustainability-related financial disclosures—applying the ISSB’s Standards—are focused on providing information to inform investment decisions. Sustainability-related financial disclosures and financial statements complement each other. For example, sustainability-related financial disclosures may explain the sustainability-related risks and opportunities arising from an entity’s activities and its assets and liabilities. Such disclosures may also provide early indications of matters that will subsequently be reflected in financial statements. For example, a company’s commitment to net zero emissions could, over time, result in liabilities being reported in the financial statements.
Now that the ISSB has completed its deliberations on its first two Standards, we have a stable set of decisions to inform our project. We also have ISSB staff experts to support our project team. Subject to future IASB decisions about the scope of this project, we could leverage the ISSB’s work and consider questions such as:
Our publications noted above from November 2020 and November 2019 will guide companies in ensuring that they appropriately consider climate-related risks in the financial statements.
At the same time, we encourage you to follow the IASB’s work by ensuring your email alert preferences are up to date. Your views are important to us, and we look forward to hearing from you as this project progresses.