Financial Reporting 2020 – An ‘Exceptional’ Year | Financial Reporting Brief November 2020


Climate Change – Reporting Must Meet Challenges (2)

Financial Reporting Brief: October 2021

Siberia – the coldest inhabited place on Planet Earth – possibly!

Not so cold in the first half of 2021, when there were record heatwaves. Meteorologists consider that this would have almost been impossible without human-caused climate change. Scientists believe it is unequivocal evidence of the impact of climate change on Planet Earth, and it is considered by them to be the strongest, and perhaps ‘strangest’, result of any attribution study to date providing clear evidence of climate change.

There is international scientific consensus that in order to prevent the worst climate effects, global net human-caused emissions of carbon dioxide (CO2) need to fall 45 percent from 2010 levels by 2030, reaching net zero around 2050. Global warming is proportional to CO2 emissions, with climate damage caused by global heating continuing to escalate for as long as emissions continue. Net zero will require emissions, greenhouse gases, to reduce to zero or that any ongoing emissions are balanced by removals.

Our global population is being challenged like practically never before by climate change and the overall degradation of our environment, to which it is a major contributor. Action must be taken throughout the Globe. In Europe, a number of initiatives are being taken including the recently announced Sustainable Finance Strategy.

Sustainability reporting must move forward to meet the challenge of ensuring that, together with financial reporting, a comprehensive corporate reporting framework is in place to meet the information needs of investors and other stakeholders.

Part 1 of this article, published in September, focused on what corporate reporting can achieve now. In this second part, we consider the initiatives being taken in relation to sustainability and comprehensive corporate reporting.


EU Sustainable Finance Strategy

Based on the European Green Deal, the EU has adopted its Sustainable Finance Strategy with a number of ambitious commitments for Europe to become the first climate-neutral continent by 2050. The EU aims to strengthen Europe’s resilience to climate change, reverse biodiversity loss with broader degradation of our environment and leave nobody behind in the process by aiming to ensure global co-operation.

The EU plans to invest €750 billion in its Green Deal over the next seven years, with the plans to be renewed going forward. A primary objective of the sustainable finance strategy is to channel private financial flows into relevant economic activities. Well integrated and efficient capital markets should act as a catalyst for effective mobilisation and allocation of capital towards sustainable capital investments.

Four main areas are identified under the Strategy where additional actions are needed for the financial system to fully support the transition of the economy towards sustainability. These are:

  • Financing the transition to sustainability;
  • Inclusiveness – providing opportunities to individuals and small/medium companies to have greater access to sustainable finance;
  • Financial sector – resilience and contribution – how to meet Green Deal targets, become more resilient and combat greenwashing; and
  • Global ambition – how to promote an international consensus for a global sustainable agenda.

A supportive framework is needed to address the challenge of financing interim steps in the urgent transition of activities towards the EU’s climate neutrality and environmental objectives.

The EU has put in place three building blocks for a sustainable financial framework. These building blocks are:

  • A classification system, or ‘taxonomy’, of sustainable activities – allowing all companies to share a common definition of sustainability and thereby provide protection against greenwashing;
  • A disclosure framework – including the impact of a company’s activities on the environment and society as well as the business and financial risks faced by a company due to its sustainability exposures (the ‘double materiality’ concept) – the proposed Corporate Sustainability Reporting Directive and the EU Sustainability Standards currently being developed are intended to provide this framework - (refer August Financial Reporting Brief);
  • A set of investment tools to help attract sustainable investment – including benchmarks, standards and labels based on the objectives of the EU Climate Transition Benchmarks and the EU Paris-aligned Benchmarks.

The EC strongly supports international work on integrating sustainability considerations with whether IFRS appropriately recognises and reports relevant climate and environmental risks in financial statements on a timely basis. The EC welcomes all efforts for a baseline global reporting standard for sustainability.


Global Initiatives

The IFRS Foundation’s proposals to establish a new International Sustainability Standards Board (ISSB) have been fully welcomed in the Global standard-setting and reporting community. There is broad consensus that consolidation is required.

The shared ambition is to introduce a global baseline of standards for sustainability – related disclosures which are focused on meeting the information needs of investors globally when assessing enterprise value. The global baseline of sustainability-related disclosures would facilitate comparability for investment decision making and also enable the proposed ISSB work with jurisdictions to ensure consistency between the global baseline and their own initiatives.

The International Organisation of Securities Commissions (IOSCO) has published ‘Report on Sustainability-related Issuer Disclosures’. The Report reiterates the urgent need to improve the consistency, comparability and reliability of sustainability reporting for investors. IOSCO’s work aims to support investors’ evolving informational needs and the ability of markets to price sustainability-related risks and opportunities, support capital allocation and protect investors.

The G7 Finance Ministers and Central Bank Governors have welcomed the IFRS Foundation’s programme of work to develop a baseline standard under robust governance and public oversight built from the TCFD Framework and the work of sustainability standard setters.

The work of sustainability standard setters includes the publication in December of a prototype climate-related financial disclosure standard which can be used together with the TCFD to provide a very useful starting point for development of global standards. The paper is the work of a group of five internationally significant framework and standard-setting institutions.


Recent Developments

There is a regular flow of development projects and reports on climate-related matters. In recent months, two of particular significance are:

  • Consultation documents published by the Taskforce on Climate-related Financial Disclosures (TCFD)
    • Proposed guidance on climate-related metrics, targets and transition plans
    • Measuring portfolio alignment: technical supplement

The consultation documents are mainly comprised of new and updated guidance, in view of the significant developments since the TCFD recommendations were published in 2017.

  • A roadmap published by the Financial Stability Board (FSB) for addressing climate-related financial risks. Starting from the general premise that policy-making needs reliable information, appropriate diagnostics and effective policy instruments. The roadmap covers four main inter-related areas:-
    • Firm-level disclosures;
    • Data – robust data to provide consistent metrics and disclosures;
    • Vulnerabilities analysis; and
    • Regulatory and supervisory practices and tools.

The time horizon of the roadmap focuses most specifically on actions in the short to medium term (2021 to 2023). It also indicates the direction and goals of work beyond that time period.

G20 has endorsed the FSB roadmap, and the FSB will report to the G20 each year on progress under the roadmap.

  • The FSB states that it will continue to act as an international forum for sharing experiences across jurisdictions, promoting best practices, and contributing to discussions in other international fora (such as through COP26 and G7 / G20 meetings). It will continue to support the IFRS Foundation’s work to develop a proposal for a baseline global sustainability reporting standard under robust governance and public oversight. As part of this work, the FSB encourages the IFRS Foundation to address the connectivity between proposed sustainability reporting standards to be developed by the ISSB and existing financial reporting standards (IFRS).

The UK Financial Reporting Council (FRC) has recently released a new paper which discusses the Environmental, Social and Governance (ESG) challenges which it has grouped into six stages – Production, Audit and assurance, Distribution, Consumption, Supervision and Regulation. The paper explains for each stage the intended plans which will be coordinated with international developments with the overall objective of reporting in a manner that meets the demand of stakeholders.



There is much to do at both the Global and European levels to develop a comprehensive corporate reporting framework, to integrate new sustainability standards and other requirements with the financial reporting standards already extant.

Companies need to be mindful of the Green Agenda and ensuring that they come within the scope of market strategy and objectives.

A Closer Look - Investor demand for corporate reporting in line with the Paris Agreement on climate change

Purpose-driven Business Reporting in Focus

Our climate change website is here.

Monthly Reporting Pack - September 2021

IFRS & Related Developments

September 2021 IASB Update available

September 2021 IFRIC Update available

IASB member Nick Anderson discusses a pilot approach to developing disclosure requirements in IFRS Standards
Investor Perspective: Disclosures in financial statements to better reflect investor needs

Accounting Enforcer developments

Significant topics to consider when preparing financial statements for 2021
Annual IAASA Observations paper

FRC published its latest list of companies whose reports and accounts have been reviewed by its Corporate Reporting Review function.

FRC publications

FRC Lab publishes survey results and resources on UK Electronic Reporting
FRC Lab publishes survey results and resources on UK Electronic Reporting (

FRC Lab calls for participants for a new project about cyber, digital & data risk
FRC Lab calls for participants for a new project about cyber, digital & data risk (

FRC Lab publishes its latest project report on reporting on risks, uncertainties, opportunities and scenarios
FRC Lab publishes its latest project report on reporting on risks, uncertainties, opportunities and scenarios (

FRC publishes review findings on viability and going concern disclosures
FRC publishes review findings on viability and going concern disclosures

Climate, sustainability & related developments

Recent sustainability and integrated reporting developments
Recent sustainability and integrated reporting developments (

IFAC calls on stakeholders to prepare now for global sustainability reporting
IFAC calls on stakeholders to prepare now for global sustainability reporting standards (

Frequently asked questions by shareholders on developments in sustainability standard setting by the International Financial Reporting Standards Foundation (‘IFRS Foundation’)
FRC’s FAQs on International Sustainability Standards Setting.

FRC publishes review findings on Streamlined Energy and Carbon Reporting Requirements (SECR)
FRC publishes review findings on SECR (

Legal & Regulatory Developments

Legislative proposals published to upgrade the ODCE to an independent Authority and make other miscellaneous company law amendments
Companies (Corporate Enforcement Authority) Bill 2021 – No. 107 of 2021 – Houses of the Oireachtas

Deloitte Publications

IASB proposes reduced disclosures for subsidiaries without public accountability
Need to know — IASB proposes reduced disclosures for subsidiaries without public accountability (

IASB proposes a minor amendment regarding the initial application of IFRS 17 and IFRS 9
Need to know — IASB proposes a minor amendment regarding the initial application of IFRS 17 and IFRS 9 (

Deloitte guidance for audit committees considering the quality of their statutory audit
Governance in focus – Effectiveness of the external audit process – 2021 framework

Deloitte guidance to help audit committees review their effectiveness
Governance in focus – Audit Committee effectiveness – 2021 framework

Deloitte’s IFRS on Point highlights critical financial reporting developments on the main IFRS-related news stories for the particular month
IFRS on Point — August 2021

Other publications

Time to get Tangible about Intangible Assets is the first in a series of papers to be published by the International Valuation Standards Council (IVSC) looking to contribute to realigning accounting and reporting standards with the value creation and preservation strategies utilised in modern business models.

Other publications - US GAAP

This Roadmap addresses US GAAP financial reporting, accounting, and auditing considerations to help companies navigate challenges related to preparing an IPO registration statement and ultimately going public
Roadmap: U.S. Initial Public Offerings (2021)

This issue of Quarterly Accounting Roundup discusses the US GAAP financial reporting developments that occurred in the third quarter of 2021
Quarterly (US GAAP) Accounting Roundup: Third quarter — 2021

This Heads Up discusses a sample letter recently released by the SEC’s Division of Corporation Finance (DCF) that highlights the types of comments the DCF may issue to public companies regarding climate-related disclosures
Heads Up — SEC Publishes Sample Comments on Climate-Change Disclosures

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