Podcast
Questions and Answers
What is the primary purpose of disclosures in IFRS S1 and IFRS S2?
What is the primary purpose of disclosures in IFRS S1 and IFRS S2?
- To inform about the impact of risks and opportunities on financial prospects (correct)
- To enhance competitive advantage
- To provide detailed analysis of market trends
- To comply with legal standards in all jurisdictions
Which aspect is NOT part of the familiar structure outlined in IFRS S1 and IFRS S2?
Which aspect is NOT part of the familiar structure outlined in IFRS S1 and IFRS S2?
- Market predictions (correct)
- Risk management
- Governance
- Metrics and targets
What does the ESRS E1 standard specifically address?
What does the ESRS E1 standard specifically address?
- Social responsibility metrics
- Climate change mitigation planning (correct)
- Employee engagement policies
- Economic growth strategies
Which metric is not relevant to Chief Risk Officers (CROs) according to the provided content?
Which metric is not relevant to Chief Risk Officers (CROs) according to the provided content?
Which of the following is a component of the ESRS regarding climate change requirements?
Which of the following is a component of the ESRS regarding climate change requirements?
What is considered material from an impact perspective?
What is considered material from an impact perspective?
How is materiality determined for actual negative impacts?
How is materiality determined for actual negative impacts?
What additional factors determine the materiality of potential negative impacts?
What additional factors determine the materiality of potential negative impacts?
On what basis is materiality assessed for actual positive impacts?
On what basis is materiality assessed for actual positive impacts?
Which of the following is NOT a factor in determining financial materiality?
Which of the following is NOT a factor in determining financial materiality?
What does the entity's sustainability context refer to?
What does the entity's sustainability context refer to?
What should material disclosures reflect about the entity?
What should material disclosures reflect about the entity?
Which aspect is NOT considered when determining a materiality approach?
Which aspect is NOT considered when determining a materiality approach?
What is one of the key elements from the GRI Standards related to an entity’s strategy?
What is one of the key elements from the GRI Standards related to an entity’s strategy?
Which factor can influence the importance of sustainability in a business strategy?
Which factor can influence the importance of sustainability in a business strategy?
How should an entity's governance structure relate to sustainability performance?
How should an entity's governance structure relate to sustainability performance?
What does competency in governance refer to concerning sustainability?
What does competency in governance refer to concerning sustainability?
Why is an entity's strategy considered an important element of sustainability reporting?
Why is an entity's strategy considered an important element of sustainability reporting?
What is required to maintain stakeholder trust?
What is required to maintain stakeholder trust?
Which entity focuses on stakeholder input to determine material topics from an impact perspective?
Which entity focuses on stakeholder input to determine material topics from an impact perspective?
What does ESRS expect from stakeholders regarding sustainability statements?
What does ESRS expect from stakeholders regarding sustainability statements?
What is the first step in the materiality process according to GRI?
What is the first step in the materiality process according to GRI?
How does IFRS S1 recommend entities address their Sustainability Reporting Obligations (SROs)?
How does IFRS S1 recommend entities address their Sustainability Reporting Obligations (SROs)?
Which of the following statements is true about the materiality finder provided by SASB?
Which of the following statements is true about the materiality finder provided by SASB?
What aspect does ESRS adopt as the basis for reporting on sustainability matters?
What aspect does ESRS adopt as the basis for reporting on sustainability matters?
What should entities disclose to assess the quality and sufficiency of stakeholder engagement?
What should entities disclose to assess the quality and sufficiency of stakeholder engagement?
What must entities describe in their process for identifying and assessing climate-related impacts?
What must entities describe in their process for identifying and assessing climate-related impacts?
Which scenario must entities consider when identifying climate-related hazards?
Which scenario must entities consider when identifying climate-related hazards?
What is a key element of governance structures to ensure accountability for entities?
What is a key element of governance structures to ensure accountability for entities?
How must entities' reporting reflect their impacts according to governance requirements?
How must entities' reporting reflect their impacts according to governance requirements?
What is the primary purpose of disclosing material information according to the standards?
What is the primary purpose of disclosing material information according to the standards?
What kind of risks must entities assess regarding their business activities?
What kind of risks must entities assess regarding their business activities?
Which frameworks are considered more prescriptive in their requirements for disclosures relating to governance?
Which frameworks are considered more prescriptive in their requirements for disclosures relating to governance?
What type of climate scenario must be considered for assessing transition events?
What type of climate scenario must be considered for assessing transition events?
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Study Notes
Stakeholder Engagement
- Entities must know their stakeholders and engage with them to understand their views and expectations.
- Maintaining stakeholder trust requires engaging with them, responding to their concerns, and providing balanced disclosures.
- To assess the quality of stakeholder engagement, entities should disclose:.
- The criteria for determining stakeholder groups and who those groups are
- The method and frequency of engagement
- Stakeholder views and concerns
- How stakeholder feedback influenced the selection, review and updating of material topics
###Â Materiality
- GRI focuses on stakeholder input to determine material topics from an impact perspective along the value chain.
- IFRS S1 requires disclosures to be sufficient for primary users to understand how the entity addresses its SROs along the value chain.
- ESRS expects stakeholders to be engaged in determining the entity's impacts, risks, and opportunities from an impact and financial materiality perspective
Materiality Process GRI
- Step 1: Understand the organization's context
- Step 2: Identify actual and potential impacts
- Step 3: Assess the significance of the impacts
- Step 4: Prioritize the most significant impacts for reporting
Materiality Process IFRS S1
- IFRS S1 refers to SASB standards for industry-specific issues.
- SASB provides a materiality finder which allows reporting entities and users to search for material subjects.
Materiality Process ESRS
- ESRS adopts double materiality as the basis for reporting on sustainability matters.
- This approach considers both impact materiality and financial materiality
- Impact Materiality: Materiality for negative impacts is based on the severity of the impact (actual) or the severity and likelihood of the impact (potential).
- Impact Materiality: Materiality for positive impacts is based on the scale and scope of the impact (actual) or the scale, scope, and likelihood of the impact (potential).
- Financial Materiality: Determines if information is material for primary users in making decisions relating to providing resources to the entity.
Assessing Materiality
- To assess whether an entity has met the requirements for defining, determining, and disclosing material topics, consider the following:
- What does the entity do?
- What are the relevant requirements?
- What is the entity's sustainability context?
- What materiality approach has been taken?
- What do stakeholders think?
- What are the priority impacts, risks, and opportunities?
IFRS Sustainability Disclosure Standards
- The structure of both IFRS S1 and IFRS S2 aligns around disclosures that provide information about the impact of risks and opportunities on financial performance
- Key areas include:
- Governance
- Strategy
- Risk Management
- Metrics and Targets
- Industries should refer to and consider the applicability of SASB standards.
- CRO Metrics include:
- GHG emissions
- Energy Management
- Climate Change Adaptation
ESRS Standards
- Contain ten topical standards for reporting on key ESG matters, including one specifically on climate change.
- ESRS E1 Climate Change requires disclosures about:
- Transition plan for climate change mitigation
- Policies related to climate change mitigation and adaptation
- Process for identifying and assessing climate-related impacts, risks, and opportunities, including:
- Impacts on climate change, including GHG emissions
- Climate-related physical risks
- Climate-related transition risks and opportunities
Governance
- Robust governance policies and systems are essential accountability mechanisms for:
- Providing guidance, oversight, review, and recommendations
- Ensuring transparent reporting
- Disclosing material information
Governance Disclosure Requirements
- All three reporting frameworks have a similar intent, GRI and ESRS are more prescriptive.
- Key considerations include:
- Governance Structure
- Competency
- Active Oversight
- Integration of sustainability considerations
- Alignment of compensation to sustainability performance
Strategy
- An entity’s strategy will reflect its assessment of sustainability-related risks and opportunities and its commitment to sustainability
- The importance of sustainability in business strategy will depend on:
- The attitude towards sustainability of investors and directors
- The nature of the business
- The influence of external factors such as regulation
Strategy Disclosure Requirements
- GRI has specific and detailed disclosure requirements related to an entity's strategy for managing its impacts on the economy, environment, and people.
- Key elements include:
- Statement on sustainable development strategy outlining the relevance of sustainable development to the organization
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