Task Force on Climate-related Financial Disclosures (TCFD) as an important foundation for the ISSB standards
“Globally consistent and comparable disclosures will enable better financial decision-making,” – emphasized Klaas Knot, Chair of the Financial Stability Board (FSB) in his speech at September’s Morningstar Investment Conference in Amsterdam, on the theme of navigating climate-related financial risks.
Moving to the standardization of sustainability-related reporting and data granularity, the FSB’s Task Force on Climate-related Financial Disclosures (TCFD) has provided an important foundation for climate disclosures, and for the ISSB’s standards in particular.
While the new sustainability-related standards are being finalised and implemented, the FSB continues to encourage jurisdictions that are implementing frameworks to base them on the TCFD.
On October 13, 2022, FSB published 2022 TCFD Status Report that analyses the current state of disclosure practices as well as progress in firms’ disclosures in line with the TCFD Recommendations over the past five years. According to this report, disclosure of the resilience of companies’ strategies under different climate-related scenarios (Strategy c in the TCFD recommendations) continues to have the lowest level of disclosure across the 11 recommended disclosures, at 16%.
The FSB recognises the continuing need to maintain momentum by monitoring and reporting on progress in firms’ climate disclosures, during the period until the ISSB’s global baseline standard is agreed and the implementation of that standard across jurisdictions begins to be monitored. The next TCFD status report is expected to be published in 2023, reviewing disclosures by companies in their public reporting for 2022.
EBA and ECB responded to proposals on sustainability-related standards
Earlier this year, the European Banking Authority (EBA) and the European Central Bank (ECB) have also published their responses to the consultations of the ISSB and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
First and foremost, ECB and EBA recommended to both, ISSB and EFRAG, to closely cooperate with each other for the development of a comprehensive global baseline of sustainability disclosures for the capital markets and to ensure alignment with other EU standards.
Ensuring consistency with the banks’ Pillar 3 ESG requirements
EBA emphasized the importance of alignment between EFRAG, ISSB, and other standard setters, as well as the provision of consistency with banks' Pillar 3 ESG risks disclosure requirements , so as to reach a greater level of comparability and quality of the disclosures.
Namely, in response to EFRAG consultation EBA noted that consideration of the information that banks are required to disclose into their ESG Pillar 3 report is gaining special importance for cross-sectors standards, including the further work on the sector-specific standards. The EBA has coordinated the responses with the European Securities and Markets Authority (ESMA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Central Bank/Single Supervisory Mechanism.
In addition, EBA is convinced that ESG information included in the management report should be incorporated by reference to the Pillar 3 disclosures in those case when the specific information required under the two frameworks is equivalent. Such possibility should be stated in the ED ESRS 1 to reduce unnecessary redundancy and ease the reporting burden.
In order to consolidate and streamline the efforts related with gathering the ESG related data and fulfilling the regulatory requirements, we created Green Data Model. The solution is composed of data models and transformation mechanisms that would connect required data outputs with existing internal data assets and define the data gaps.
In terms of the outputs, we can map to existing data requirements such as European Sustainability Reporting Standards, SASB XBRL taxonomy, sector specific requirements such as EBA Pillar 3 ESG disclosure requirements or entity specific set of KPIs.
Get in touch with our experts to find out more about ATOME Green Data Model:
Links to the EBA documents:
- Letter on EBA comments to the ISSB consultation
- Letter on EBA comments to the EFRAG consultation
- EBA responses to EFRAG consultations
Links to the ECB documents: