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TAC Public Meeting December 2024: Meeting Summary
Public Meeting Summary
Date: 05 December 2024 Time: 10:45–17:00 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 |
| Craig Mackenzie | Member |
| David Harris | Member |
| Dia Desai | Member (online) |
| Harriet Cullum | Member (online) |
| Hilary Eastman | Member |
| Jeremy Osborn | Member |
| Joseph Noss | Member (online) |
| Madeleine Evans | Member |
| Nick Rowbottom | Member |
| Peter Hogarth | Member |
| Scott Barlow | Member |
| Supriya Sobti | Member |
| Jenny Carter | Member appointed by the Financial Reporting Council (FRC) |
| Paul Lee | Member appointed by the UK Endorsement Board (UKEB) |
| Carlos Martin Tornero | Observer from the Financial Conduct Authority (FCA) |
| Mike Ashby | Observer from the Department for Business and Trade (DBT) |
| Mita Gandhi | Observer from the Bank of England (BoE) |
| Sarah-Jayne Dominic | Secretariat |
Private meeting The TAC held a private meeting at 10.15 to 11:00 to discuss confidential and administrative matters.
1. Welcome and apologies
The Chair welcomed members and observers to the December meeting of the Technical Advisory Committee (TAC). No apologies were received, and no conflicts of interest related to the agenda items were declared.
The Chair outlined that the objective of the meeting was to finalise any outstanding revisions to the technical assessment and endorsement recommendations of IFRS S1 and IFRS S2 (the report) and vote to approve it before submission to the Secretary of State (SoS).
2. Reflections on the private meeting with ISSB
It was noted that nine TAC members attended a private meeting with two members from the International Sustainability Standards Board (ISSB) on Monday, 2 December 2024, at the Financial Reporting Council (FRC) offices. The purpose of the meeting was to exchange views on the TAC's progress and the status of its draft technical assessment and endorsement recommendations of IFRS S1 and IFRS S2.
The discussion mainly focussed on the following:
- The TAC's proposed amendments to IFRS S1 and IFRS S2 (the standards), with particular focus on financed emissions. The ISSB representatives provided a walkthrough of the requirements for financed emissions under the standards.
- Areas where the TAC is recommending further guidance or clarification from the ISSB.
- Specific aspects of IFRS S1 and IFRS S2 that the TAC proposes to be closely monitored once reporting begins.
- Considerations for the ISSB in its future standard-setting activities; and
- The ISSB's future plans.
3. General reporting update – paper 4
It was noted that the Mansion House Speech highlighted the UK Government's intention to consult on streamlining sustainability-related corporate disclosures for economically significant entities. While the term 'economically significant' is not defined it was noted that this should not impact the technical assessment of IFRS S1 and IFRS S2 which the members have done focussing on Public Interest Entities (PIEs) as presently defined.
4. Final review of TAC technical assessment and endorsement recommendations
The discussion revisited the financed emissions subject following the private meeting held with two members of the ISSB on 2 December 2024. The focus was on finalising the recommendations and refining the specific wording required in the report to reflect the agreed position. It was re-emphasised that the timing challenge in reporting financed emissions for the same period as the financial statements was not arising from third parties (counterparties), as IFRS S2 permits the use of latest available data from counterparties even if it predates the reporting entity's current reporting date. Instead, the issue stems from the practical timing difficulties in obtaining the reporting entity's finalised balance sheets for investments and loans as of the reporting date, which are required to estimate financed emissions aligned with the financial statements reporting period.
The TAC considered the following three options to address the financed emissions issue:
- Retain the previously proposed amendment from the 15 November 2024 meeting, recommending a requirement for entities to disclose the reporting date for the reporting entity's investments/gross exposure used to determine financed emissions when it is impracticable to use current reporting date data.
- Take no action and recommend the requirements for reporting financed emissions are maintained with no requirement for amendments or clarifications.
- Recommend no amendments to the standards but seek written acknowledgement or clarification from the ISSB or, from the UK Sustainability Disclosure Policy Implementation Committee (PIC), if not provided by the ISSB, that the current practice where financial institutions determine financed emissions using previous period's balance sheet data for investments/gross exposure and disclose this as additional information alongside details of how they manage their Scope 3 greenhouse gas emissions is not inconsistent with the requirements in IFRS S1 and IFRS S2.
After careful deliberation, the TAC agreed to revise its technical assessment of the greenhouse gas emissions: financed emissions section in the report. The updated wording acknowledges that, for some entities, it is currently impracticable to estimate financed emissions for the current reporting period based on loans and investments as of the current financial statements reporting date. The revisions also recognise that the prevailing industry practice of reporting financed emissions using data from the latest available previous period (e.g., the previous year-end or an interim period end) is currently the most reliable and decision-useful approach. The updated wording further clarifies that, where it is impracticable to reliably estimate financed emissions for the current financial reporting period using loans and investments data from the current reporting period end, entities might disclose financed emissions information for a previous reporting period (as useful additional information), clearly labelling it as such. This disclosure should be accompanied by information on how the entity manages Scope 3 greenhouse gas emissions, as required by IFRS S2 paragraph B57. Subject to acknowledgement by the ISSB or the PIC, this approach is expected to remain appropriate as industry practices evolve.
In light of these revisions, the TAC resolved to withdraw its earlier proposal (option (a) above) and instead recommend that the ISSB or the PIC provide written acknowledgment or clarification confirming that the current industry practice of calculating and disclosing financed emissions using the entity's previous period loans and investments data is not inconsistent with the requirements of IFRS S1 and IFRS S2 if this disclosure is accompanied by details of how the entity manages its Scope 3 greenhouse gas emissions.
The TAC also reviewed and approved all other remaining refinements across various sections of the report.
5. Voting and approval of the report and related provisional due process summary
The voting requirements were clarified, confirming that a simple majority was required to approve proposed amendments to the standards, technical assessments, and endorsement recommendations in the report. It was emphasised that any disagreements on specific issues are transparently documented in the respective areas of the report, ensuring they do not preclude members from voting to approve the report in its entirety.
Following the voting process, the TAC unanimously approved the proposed amendments to IFRS S1 and IFRS S2, the supporting technical assessments, and the endorsement recommendations for each Standard, alongside the related due process summary as detailed below.
Specifically, for the proposed amendments to IFRS S1 and IFRS S2 the TAC unanimously voted to approve the proposed amendments in appendix 5 of the report incorporating the revisions that were agreed in the meeting.
In addition, and specific to the technical assessments and endorsement recommendations incorporating the revisions that were agreed in the meeting, the TAC unanimously voted to approve the following statements:
- That overall, the TAC's technical assessment concludes that the endorsement of both IFRS S1 and IFRS S2 for the creation of UK Sustainability Reporting Standards meet the endorsement criteria.
- That the TAC is of the opinion that the endorsement of IFRS S1, including the proposed amendments, would be conducive to the long-term public good in the UK.
- That the TAC is of the opinion that the endorsement of IFRS S2, including the proposed amendments, would be conducive to the long-term public good in the UK.
Specific to the due process summary, the TAC unanimously voted to approve:
- That the TAC agrees with the brief summary of the due process followed in the development of the technical assessment and endorsement recommendations in relation to IFRS S1 and IFRS S2.
- That the TAC tentatively approves the due process summary.
The approvals of the proposed amendments, technical assessment and endorsement recommendations is subject to the Chair agreement of the final wording in the report.
6. AOB
It was noted that the next steps include proof-reading and finalising the report design, followed by the Chair's approval of the final report. The report is expected to be submitted to the SoS and published on FRC website by 20 December 2024.
In closing, the Chair thanked members and the Secretariat for their contributions over the past months and confirmed that the next meeting is scheduled for 14 January 2025.
The meeting ended at 15:21.