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TAC Public Meeting November 2024: Meeting Summary
PUBLIC MEETING SUMMARY
Date: 05 November 2024
Time: 09:45–17:30
Location: FRC Office, 8th Floor, 125 London Wall, London, EC2Y 5AS
The recording of the meeting and agenda papers are available online.
Attendance
| Name | Designation |
|---|---|
| Sally Duckworth | Chair |
| David Harris | Member |
| Dia Desai | Member |
| Harriet Cullum | Member |
| Hilary Eastman | Member |
| Jeremy Osborn | Member |
| Madeleine Evans | Member (absent for Agenda Item 2, 3, 4 and 5) |
| Nick Rowbottom | Member |
| Peter Hogarth | Member |
| Scott Barlow | Member |
| Supriya Sobti | Member (absent for Agenda Item 1) |
| Jenny Carter | Member appointed by the Financial Reporting Council (FRC) |
| Paul Lee | Member appointed by the UK Endorsement Board (UKEB) |
| Mike Ashby | Observer from the Department for Business and Trade (DBT) (replaced in Agenda Item 7 with Daniel Makevic) |
| Mita Gandhi | Observer from the Bank of England (BoE) |
| Carlos Martin Tornero | Observer from the Financial Conduct Authority (FCA) |
| Sarah-Jayne Dominic | Secretariat |
Apologies
| Name | Designation |
|---|---|
| Craig Mackenzie | Member |
| Joseph Noss | Member |
Private meeting
The TAC held a private meeting at 09.30 to 09.45 to discuss confidential and administrative matters.
1. Welcome and apologies
The Chair welcomed members and observers to the November meeting of the TAC.
The Chair noted that the TAC was quorate and read out the attendees—both in person and online. There were apologies from Craig Mackenzie and Joseph Noss.
The Chair asked the members to declare any interest in the agenda items. Interests were declared by David Harris who declared interest in Agenda Item 4 as an employee of the London Stock Exchange Group, which calculates and commercialises industry classification systems.
The TAC began by discussing Agenda Paper 8 which listed key updates since the October meeting. This paper was for information only and no decisions were required of the TAC. The TAC had no comments on the paper.
2. Connectivity and integration
The TAC considered Agenda Paper 2 on connectivity and integration.
This paper considers the requirements in IFRS S1 and IFRS S2 relating to the connectivity and integration of disclosures. The TAC has already discussed connectivity and integration during previous meetings with regard to a number of technical areas. This paper draws together the discussions and decisions made by the TAC. The TAC was asked to consider the following questions:
- Does the TAC agree with the analysis in this paper in relation to connectivity and integration?
- Does the TAC agree to recommend to maintain the requirements in IFRS S1 that relate to connected information?
- Does the TAC agree to include in its advice the statement in paragraph 11.2 that welcomes the use of the concept of 'connectivity'?
The TAC discussion covered the following points:
- Members discussed the TAC decisions on connectivity and integration related to reporting entity boundaries. Discussion focused on the practicalities and timelines of encouraging a shift towards financial control boundaries. This is an implementation matter to be referred to the PIC, however the TAC noted a desire for entities that have already set targets under other boundaries not to be penalised for acting early. The TAC also reiterated that this is a nuanced matter where operational control remains an important lens in some scenarios.
- Regarding connectivity and integration around targets, the TAC suggested highlighting this as an area for further consideration for the ISSB.
- Members agreed there should be recognition that connectivity and integration have distinct meanings.
- Regarding the suggested recommendation that the ISSB provides further support as to how the concept of ‘connectivity' is applied in practice, members discussed the meaning of 'further support' and specifically how formally this would need to be conveyed.
- The TAC discussed the concept of integrated reporting frameworks and whether this approach should be a focus for encouraging connectivity and integration between sustainability and financial reporting. The TAC recognised integrated reporting as a long-term ambition.
The TAC agreed to recommend to maintain the requirements in IFRS S1 that relate to connected information.
The TAC agreed to welcome the use of the concept of 'connectivity' in IFRS Sustainability Disclosure Standards but recommend that the ISSB provides further support as to how this concept is applied in practice. The TAC welcome continued efforts by the ISSB and IASB to work together on connectivity matters that seek to provide a comprehensive package of information for users of general purpose financial reports. The TAC has made specific recommendations relating to connectivity which are included as part of the technical assessment of other technical areas.
The TAC also agreed to communicate with the PIC about the potential challenges faced by entities who have already set targets using different reporting entity boundaries, and consider how not to penalise them and allow them sufficient time to make a transition to targets set based on financial control boundaries. This might include highlighting proportionality mechanisms.
3. Interoperability
The TAC considered Agenda Paper 4 on interoperability.
This paper addressed interoperability considerations that the TAC might wish to consider as part of its technical assessment of IFRS S1 and IFRS S2. The TAC was asked to consider the following questions:
- Does the TAC agree with the analysis in this paper in relation to interoperability?
- Does the TAC agree to include in its advice the statement in paragraph 13.1 that demonstrates support for interoperability?
The TAC discussions covered the following points.
- Regarding the location of disclosures, members discussed the FAQ document published by EFRAG in August 2024, and specifically questions 25 and 86 which suggest that companies listed outside the EU reporting under ESRS could put sustainability related disclosures in a supplementary document. The TAC noted this would impact the validity of the analysis in the paper.
- Members raised specific areas (namely commercial sensitivities and judgements, uncertainties and errors) where further analysis of interoperability, and potential equivalence, with ESRS would be helpful for dually reporting entities. This is an implementation issue and should be referred to the PIC. The observer from the DBT suggested there might be value in convening a group of TAC members on this subject, and others relating to interoperability, in due course.
- The TAC recognised that identifying material information and identifying sustainability-related risks and opportunities are two separate processes and that they should not be confused with regard to the analysis on interoperability.
- The TAC recognised that interoperability will be a relevant consideration not just with jurisdictions who have developed standards on different basis, such as the EU, but also with jurisdictions who are adopting IFRS Sustainability Disclosure Standards with (potential) amendments. Further, interoperability should also be considered carefully in terms of existing UK regulations.
- The TAC discussed the wording from paragraph 13.1 in agenda paper 3 on suggested endorsement recommendations, in relation to interoperability with voluntary sustainability reporting frameworks, e.g., with GRI Standards. Members considered whether it is necessary to encourage interoperability with voluntary frameworks given the consolidation of voluntary frameworks under the ISSB, and the TAC's aim to endorse the IFRS Sustainability Disclosure Standards for use in place of other frameworks. Members also discussed whether GRI Standards should be noted in particular when other voluntary, and mandatory, frameworks are not. Members recognised the usefulness of well-established internationally used frameworks such as the GRI Standards. On balance, the TAC agreed to amend the wording of the recommendation to remove the explicit reference to GRI Standards or any specific framework, and instead to focus on recognising the challenges for preparers reporting under multiple frameworks.
The TAC agrees to provide the following, amended, statement in its advice to the Secretary of State:
The TAC supports continued efforts towards interoperability of the IFRS Sustainability Disclosure Standards with requirements in other jurisdictions. With the range of requirements required by other jurisdictions (some ISSB based, but others using different reporting frameworks or standards), there is a risk that international comparability is compromised and the quality of decision-useful information reduced. Both reporting entities and users of general purpose financial reports will benefit from increased interoperability, and therefore the TAC supports the global baseline and greater alignment between IFRS Sustainability Disclosure Standards and jurisdictional reporting requirements around the world.
The TAC also recommends the PIC considers further analysis regarding interoperability and equivalence, including regarding commercial sensitivity and judgements, and uncertainties and errors. The TAC recommends the PIC takes a broad view covering other jurisdictions (both those adopting standards on the basis of the ISSB standards and those not), voluntary frameworks, and existing UK regulations.
The TAC has made specific recommendations relating to interoperability which are included as part of the technical assessment of other technical areas.
4. Follow up – financed emissions
The TAC considered Agenda Paper 4 revisiting certain financed emissions tentative recommendations from previous meetings.
The TAC was asked to finalise its recommendations relating to financed emissions, including:
- to amend IFRS S2 so that entities are not required to use Global Industry Classification Standard (GICS) when disaggregating gross financed emissions but may use GICS or a different classification system they are already using for existing regulatory or financial reporting purposes.
- to amend both IFRS S1 and IFRS S2 to clarify that asset managers, commercial banks and insurers should provide information about the reporting period for financed emissions information as it might not be the same as the current reporting period for the financial statements.
- to suggest that entities consider using guidance provided by established industry standards on the expected level of coverage of emissions included in financed emissions disclosures, and suggest to the ISSB that this could be an area that is considered as part of the development of ISSB's industry-based standards.
- The TAC is also asked to approve the suggested wording for the amendments to the requirements related to financed emissions.
The TAC was asked to consider the following questions.
- Does the TAC agree with the analysis in this paper in relation to the TIG discussions on financed emissions?
- Does the TAC agree to the summary of recommendations and areas to note in its advice relating to financed emissions as outlined in paragraphs 16–17?
- Does the TAC agree to recommend the suggested amendments in paragraph 18 relating to financed emissions?
The TAC discussions covered the following points.
- Members flagged that methodologies for the calculation of net zero targets might differ from how financed emissions are calculated, and therefore further work is required on bringing these approaches together. The TAC does not have a specific recommendation relating to this point, but acknowledges that there are inconsistencies that need to be addressed by those initiatives that develop these methodologies.
- Members discussed the proposed amendment to IFRS S2 relating to the time lags for reporting financed emissions information. The amendment relates to the ability of financial institutions to close their often complex balance sheets and then collect and calculate financed emissions information data, rather than the time lag in the counterparties' data. The TAC also reiterated that this amendment should support greater transparency rather than preventing current practice to evolve. The TAC did not agree to the suggested wording for the amendment and have requested revised draft wording to be tabled at a future meeting.
Alongside existing recommendations relating to financed emissions, the TAC agreed to confirm that it recommends to:
- amend IFRS S2 so that entities are not required to use GICS when disaggregating gross financed emissions but may use GICS or a different classification system they are already using for existing regulatory or financial reporting purposes.
- amend both IFRS S1 and IFRS S2 to clarify that asset managers, commercial banks and insurers should provide information about the reporting period for financed emissions information as it might not be the same as the current reporting period for the financial statements.
- suggest that entities consider using guidance provided by established industry standards on the expected level of coverage of emissions included in financed emissions disclosures, and suggest to the ISSB that this could be an area that is considered as part of the development of ISSB's industry-based standards.
The TAC did not agree with the suggested wording and requested further changes to be tabled at a future meeting.
5. Follow up - effective date and transition relief
The TAC considered Agenda Paper 5 revisiting effective date and transition relief amendments.
In the October 2024 meeting, the TAC agreed to amend the effective date and transition reliefs for the UK Sustainability Reporting Standards. This paper presented the suggested wording for the effective date and transition reliefs. The TAC was asked to consider the following question.
- Does the TAC agree to recommend the suggested amendments in relating to effective date and transition?
The TAC discussion covered the following points.
- The TAC discussed whether the references to a specific effective date from IFRS S1 paragraph E1 and IFRS S2 paragraph C1 should be removed. The TAC also discussed whether, if there is no reference to a date, this would make the section titles for IFRS S1 Appendix E and IFRS S2 Appendix C, 'Effective date and transition', inaccurate and therefore mean this title should be amended. The TAC agreed to recommend to remove the references to a specific effective date, and to recommend to change the title to 'initial application and transition'. However, should the government decide to include a date, the title 'effective date and transition' could be maintained.
- IFRS S1 paragraph E6 should be further amended to explicitly reference the second annual reporting period for clarity. For the second annual reporting period, the paragraph should state that comparative information about climate-related risks and opportunities will be required.
- The TAC agreed to maintain IFRS S1 paragraph E4 with a clarification that its content has been deleted, in order to maintain the same paragraph numbers for ease of reference between IFRS S1 and the final version of UK Sustainability Reporting Standards.
- The TAC reiterated the decision to recommend amending the transition relief in IFRS S1 to extend the ‘climate-first' reporting relief to two years and therefore require disclosure of all sustainability-related risks and opportunities in the third year of reporting.
- The TAC and its observers noted that many issues relating to transition reliefs are implementation matters on which the PIC will offer further consideration.
The tentative endorsement recommendation in the paper is to approve the amendments as detailed in the paper in relation to the effective date and transition reliefs.
The TAC agreed to these amendments, with the following adjustments:
- the section titles for IFRS S1 Appendix E and IFRS S2 Appendix C, 'Effective date and transition', is amended to ‘Initial application and transition' as long as the final standard does not reference a specific effective date as recommended.
- IFRS S1 paragraph E4 is maintained with a note clarifying its content has been deleted.
- IFRS S1 paragraph E6 is amended to explicitly reference the second annual reporting period, for which comparative information about climate-related risks and opportunities will be required.
6. Summary of stakeholder feedback
The TAC considered Agenda Paper 6 which provides a summary of stakeholder feedback on the adoption of IFRS S1 and IFRS 2 in the UK.
The paper was for information purposes only and no decision was required from the TAC.
The TAC noted that stakeholder views have not changed significantly since the TAC's Call for Evidence in 2023.
7. Review of TAC's tentative decisions to date
The TAC discussed the final recommendations including all the decisions that have been made to date in relation to the technical assessment of IFRS S1 and IFRS S2. The TAC discussed suggested edits to the final recommendations, including reprioritising the recommendations that will be delivered to the Secretary of State.
Further discussion about the final recommendations will take place in the next meeting.
8. AOB
There was no AOB.
There was a brief discussion about the possibility of having another short meeting before the next scheduled meeting which is due to take place on 5 December 2024. Subsequently, an additional TAC meeting to be held by video conference has been scheduled for 15 November 2024.
The meeting ended at 17:30.