Companies will now be required to use climate-related scenario analysis to inform resilience analysis. The news comes following the unanimous decision made by the International Sustainability Standards Board (ISSB).

The ISSB voted to confirm that companies are required to implement a climate-related scenario analysis when informing on climate resilience, and to divulge risks and opportunities to support their disclosures at the supplementary board meeting held on 1 November 2022. 

The ISSB also concurred to support application for preparers including implementing materials developed by the Task Force for Climate-Related Financial Disclosures (TCFD) to provide direction on conducting a scenario analysis. This is in response to requests from stakeholders on defining the term 'climate-related scenario analysis'.

Application support

• The ISSB will refer to TCFD guidance that sets out types of scenario analysis, as well as agreeing to consolidate the guidance, specifying that scenario analysis must be applied but setting out the required approach that is scalable to an entity’s circumstances.
• Specifying that an entity would need to undertake the qualitative form of scenario analysis as a foundation for its resilience analysis as a minimum.
• The ISSB will provide guidance on which climate scenarios an entity should use, depending on their circumstances, including industry and country exposure, to provide relevant information to investors.
• To support preparers, the ISSB will also readily accept that 'off-the-shelf scenarios' such as those of the Network for Greening the Financial System (NGFS) can be useful resources for companies.

In the October meeting, the decision was made to build on other decisions the ISSB had made related to climate-related disclosures. A further supplementary board meeting is due to take place on 3 November at which the board will debate the proposals in S1 General Requirements for Sustainability-related Disclosures.

Source: IFRS