Creating a climate of change digest


Creating a climate of change digest

Issue 32: July 2024

On April 25, 2024, the US Department of the Treasury, and the Internal Revenue Service (IRS) released final rules on transferability, a key Inflation Reduction Act (IRA) provision that expands the availability of capital to advance the US clean energy transition.

The IRA introduced two new mechanisms for businesses to access clean energy tax credits: elective pay (direct pay) and transferability. Transferability allows entities ineligible for elective pay but qualifying for tax credits to sell these credits to third parties for cash. This system enables governments, tax-exempt organizations, and other entities to fully utilize IRA tax credits without needing tax equity partnerships, which were previously necessary. Transferability simplifies clean energy project financing by allowing immediate, tax-free funds from credit sales, thus reducing financial obstacles and dependency on conventional tax equity partnerships with investors.

On April 30, 2024, the International Sustainability Standards Board (ISSB) published the International Financial Reporting Standards (IFRS®) Sustainability Disclosure Taxonomy (ISSB Taxonomy) to enable investors and other capital providers to analyze sustainability-related financial disclosures efficiently. The ISSB Taxonomy includes elements for tagging sustainability-related financial information prepared in accordance with these standards, making it machine-readable and facilitating efficient extraction, comparison, and analysis of such information.

On May 2, 2024, the European Sustainability Reporting Standards (ESRS)-ISSB Standards Interoperability Guidance document, published by the European Financial Reporting Advisory Group (EFRAG), provided detailed recommendations for ensuring the interoperability of ESG reporting standards. The guidance is organized into four primary sections, addressing interoperability across general reporting requirements and extending to climate-related disclosures. Additionally, it underscores the significant level of interoperability attained between the ESRS and the corresponding climate disclosure requirements outlined in the ISSB Standards.

On May 9, 2024, the Federal Reserve Board of Governors (FRB) released the summary of the exploratory pilot Climate Scenario Analysis (CSA) exercise that was announced in September 2022 with six of the US largest banks. The CSA exercise was exploratory in nature and the FRB has recently released a summary report detailing the outcomes of this analysis. The report highlights the diverse strategies banks have implemented to evaluate and manage the financial effects of climate-related risks on their operations.

Also on May 9, 2024, the Science Based Targets initiative (SBTi) released the Terms of Reference for the upcoming revision of the Corporate Net-Zero Standard. The document describes key information related to this revision, such as project objectives, the steps for developing the revised Corporate Net-Zero Standard, the interim and final deliverables of the revision project, the proposed timeline for the revision, and the potential opportunities for stakeholder involvement during the standard revision process.

Creating a climate of change digest: July 2024

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