FSA Credential Level I Study Guide Part II - Sustainability Information Ecosystem PDF

PART II FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM INTRODUCTION TO THE SUSTAINABILITY INFORMATION VALUE CHAIN AND THE ROLE OF DATA PROVIDERS LEARNING OBJECTIVE(S) CO...

PART II FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM INTRODUCTION TO THE SUSTAINABILITY INFORMATION VALUE CHAIN AND THE ROLE OF DATA PROVIDERS LEARNING OBJECTIVE(S) COVERED IN THIS CHAPTER: 5 RECOGNIZE Figure 5—The sustainability information value chain COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 46 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM data providers 5.2.1. DATA AGGREGATORS Structured data Unstructured data COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 47 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 5.2.2. ESG RATINGS AND ANALYTICS PROVIDERS COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 48 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 5.2.3. DATA PRODUCTS SHAPED BY CUSTOMER NEEDS 5.2.4. ADDITIONAL INFLUENCERS OF SUSTAINABILITY DATA QUALITY 5.2.4.1. Additional producers Disclosure platforms and reporting software Software providers disclosure platforms COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 49 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Securities exchanges Securities exchanges Mission-based coalitions and alliances coalitions alliance orga- nizations Industry associations industry associations COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 50 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 5.2.4.2. Additional users Non-governmental organizations Sell-side analysts Sell-side analysts COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 51 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 5.3.1. DIFFERENT AUDIENCE NEEDS 5.3.2. A BROAD RANGE OF DATA TYPES COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 52 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 5.3.2.1. Different units and bases of measurement variance 5.3.2.2. Different methodologies for preparing data 5.3.2.3. Forward-looking information COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 53 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM This chapter contains information related to the following Learning Objective(s): 5 RECOGNIZE ? JUMP TO ANSWERS COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 54 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM THE ROLE OF STANDARDS AND FRAMEWORKS: FROM FRAGMENTATION TO COHESION IN SUSTAINABILITY DISCLOSURE LEARNING OBJECTIVE(S) COVERED IN THIS CHAPTER: 3 IDENTIFY 5 RECOGNIZE COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 55 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM The Global Reporting Initiative (GRI) The CDP The Climate Disclosure Standards Board (CDSB) The International Integrated Reporting Council (IIRC) The Sustainability Accounting Standards Board (SASB) COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 56 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM The Task Force on Climate-related Financial Disclosures (TCFD) The Task Force on Nature-related Financial Disclosures (TNFD) Frameworks COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 57 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Standards 6.3.1. INDUSTRY-AGNOSTIC OR INDUSTRY-SPECIFIC Industry-agnostic COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 58 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Table 2—Comparing sustainability disclosure frameworks and standards pre-ISSB consolidation CDP CDSB GRI IIRC SASB TCFD TNFD Target All All Investors Investors Investors Investors Investors audience stakeholders stakeholders Standard or De facto Framework Standard Framework Standard Framework Framework framework standard* Industry- Industry- Industry- Industry- agnostic agnostic agnostic agnostic or Industry- with Industry- Industry- Industry- with indus- with indus- industry- agnostic emerging agnostic try-supple- industry- supplements ments 6.3.2. GROWING RATES OF ADOPTION, AND GROWING CONFUSION COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 59 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Figure 6—2022 adoption rates of GRI Standards, SASB Standards and TCFD Recommendations COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 60 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Figure 7—TCFD-aligned regulation COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 61 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Figure 8—Aligning frameworks and standards for comprehensive reporting COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 62 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM A closer look: supporting comments The quotes below provide a small sample of the comments received in support of the IFRS Foundation’s ‘Consultation Paper on Sustainability Reporting.’ —International Organization of Securities Commissions —Institute of Singapore Chartered Accountants —Unilever pl —BlackRock, Inc. Figure 9—IFRS Sustainability Disclosure Standards build on investor-focused standards and frameworks COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 63 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 6.4.1. A FAMILIAR PATTERN Figure 10—IFRS Foundation sister boards COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 64 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM This chapter contains information related to the following Learning Objective(s): 3 IDENTIFY 5 RECOGNIZE ? JUMP TO ANSWERS COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 65 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM MATERIALITY: GOING BEYOND INVESTORS LEARNING OBJECTIVE(S) COVERED IN THIS CHAPTER: 4 DISTINGUISH COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 66 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 7.2.1. MATERIALITY CONSIDERATIONS UNIQUE TO SUSTAINABILITY-RELATED FINANCIAL DISCLOSURE 7.2.1.1. Materiality judgements applied in the context of sustainability-related COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 67 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 7.2.1.2. Identifying sustainability-related risks and opportunities COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 68 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM transition risk COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 69 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 7.2.2. STANDARDS BUILT ON A COMMON DEFINITION 7.3.2. IMPACT FOCUSED impact materiality COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 70 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 7.3.3. INCLUSIVE OF STAKEHOLDERS COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 71 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM A closer look: double materiality - 127 COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 72 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 7.4.1. STAKEHOLDER AND INVESTOR-FOCUSED COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 73 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM A closer look: why sustainability-related risks and opportunities are not technically material - - - - COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 74 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 7.5.1. THE DYNAMIC NATURE OF MATERIALITY COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 75 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM This chapter contains information related to the following Learning Objective(s): 4 DISTINGUISH ? JUMP TO ANSWERS COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 76 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM SUSTAINABILITY DISCLOSURE ACROSS JURISDICTIONS LEARNING OBJECTIVE(S) COVERED IN THIS CHAPTER: 5 RECOGNIZE 6 RECOGNIZE COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 77 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM To shape new and updated standards: To promote adoption and proper implementation: To interpret compliance: COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 78 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Intergovernmental regulatory representatives and individual regulators that voiced support for the formation of the ISSB The G7 The G20 The International Organization of Securities Commissions (IOSCO) The Financial Stability Board (FSB) - The African Finance Ministers COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 79 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Securities regulators around the world order): Australia Brazil Canada China (People’s Republic) European Union France Germany Hong Kong: the cur rent state of cor porate r ep o r t i n g: India Japan policy and economic environment: South Africa Korea (Republic of) industry composition: Switzerland United Kingdom social context: United States COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 8.3.1. CLIMATE FIRST: VOLUNTARY TO MANDATORY DISCLOSURE IN DIFFERENT JURISDICTIONS Canada COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM European Union United States COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 8.4.1. INTERPRETIVE GUIDANCE Example: Interpretive guidance Legislative and regulatory impacts: - - International accords: Indirect consequences of regulation or business trends: - - Physical impacts of climate change: COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 83 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 8.4.2. PRINCIPLES-BASED Example: Principles-based disclosure rules Australian Securities and Investments Commission (ASIC) 2019 Regulatory Guide (RG) 228 and 247: impairment calculations European Union Directive on Non-Financial Reporting (2014/95/EU): - - COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM 8.4.3. COMPLY OR EXPLAIN ‘Comply or explain’ Example: ‘Comply or explain’ disclosure rules 2019 Philippines SEC Memorandum Circular No. 4: - - COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 85 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM THE MEANING OF MANDATES Flexible: 8.4.4. MANDATORY LINE ITEMS Prescriptive: - - EU Taxonomy for Sustainable Economic Activities: Japan’s Mandatory Greenhouse Gas Accounting and Reporting System: COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 86 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM Japan’s Ministry of Economy, Trade and Industry (METI) Practical Guidelines for Corporate Governance Systems (CGS): King IV Report on Corporate Governance for South Africa, 2016: COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 87 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 88 FSA CREDENTIAL LEVEL I STUDY GUIDE PART II: THE SUSTAINABILITY INFORMATION ECOSYSTEM This chapter contains information related to the following Learning Objective(s): 5 RECOGNIZE 6 RECOGNIZE ? JUMP TO ANSWERS COPYRIGHT © 2023 IFRS FOUNDATION. ALL RIGHTS RESERVED 89 PART III