Climate Risks and Sustainability Disclosure Standards (PDF)

II. Climate Report 2  Key points in climate report What are the climate risks and opportunities faced by the company? (“financial materiality”) What are the company’s impacts on client change? (“impact materiality”) How dos the company take actions to address each risk?...

II. Climate Report 2  Key points in climate report What are the climate risks and opportunities faced by the company? (“financial materiality”) What are the company’s impacts on client change? (“impact materiality”) How dos the company take actions to address each risk? How dos the company take advantage of the opportunities? What are the metrics and targets to measure the risks and progress made by the company? 3 frameworks: simplified picture up to 2021 In Nov. 2021, SASB was renamed as ISSB TCFD functions turned over to ISSB 2021 Task Force on Climate-related Financial Sustainability Disclosures Accounting Standard Board 4 Global sustainability disclosure frameworks: in 2025 2021 5 ISSB as the primary setter of international sustainability reporting standards Financial Sustainability accounting reporting standards standards To be adopted by HK, Japan and many other 6 jurisdiction  Task Force on Climate-related Financial Disclosures (TCFD) Organization in charge of setting standards for reporting climate-related information Recommendations issued in 2017 Widely accepted globally TCFD functions turned over to ISSB  In addition to global sustainability reporting, ISSB is now the setter of climate disclosure 7 IFRS S1 and S2 in June 2023 8  IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information Sets out the requirements for disclosing information about an entity’s sustainability-related risks and opportunities 9  IFRS S2 Climate-related Disclosures Sets out the requirements for disclosing information about an entity’s climate-related risks and opportunities: Revision of TCFD Adopted by HK Stock Exchange in April 2024 (3 tiers based on size) 10 IFRS S2’s Climate Disclosure: 4 pillars (focus on 2 subjects in this course) 11  III. Climate Risks “ Physical risks Transition risks Acute Policy and legal Chronic Technology Market Reputation 12 Climate-related physical risks Such as: storms, floods, drought or Acute physical risk: event- heatwaves, which are increasing in driven severity and frequency. Such as changes in rainfall and Chronic physical risk: from temperature, which could lead to sea longer-term shifts in climatic level rise, reduced water availability, biodiversity loss and changes in soil patterns productivity. 13  Financial implications of physical climate risks Acute risk: costs from direct damage to assets indirect effects of supply-chain disruption Chronic risk: Costs due to changes in water availability, sourcing and quality; Extreme temperature changes affecting the entity’s assets, operations, supply chains, transportation needs and employee health and safety. 14 Climate-related transition risks 15