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TAC Public Meeting January 2025 Paper 3: Matters for the ISSB’s consideration
Executive summary
| Date | 14 January 2025 |
| Paper reference | 2025-TAC-031 |
| Project | Technical assessment of IFRS S1 and IFRS S2 |
| Topic | Matters for the ISSB's consideration |
Objective of the paper
This paper presents a summary of key matters identified during the TAC's technical assessment of IFRS S1 and IFRS S2, to be communicated to the International Sustainability Standards (ISSB) for consideration and resolution.
Decisions for the TAC
The TAC is asked to review and approve the draft letter and accompanying appendix for sharing with the ISSB.
Appendices
Appendix 1 - Draft letter for the ISSB Appendix 2 – Summary of matters for the ISSB's consideration
Legal Information
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Context
1Following the TAC's technical assessment and subsequent submission of its Technical assessment and endorsement recommendations report on IFRS S1 and IFRS S2 to the Secretary of State for Business and Trade in December 2024, the TAC Secretariat has consolidated all key follow-up matters highlighted for the ISSB's attention.
2These issues were discussed as part of the TAC's technical assessment process and have now been organised for clear and effective communication with the ISSB.
Overview of the matters
3The matters result from the TAC's review of key technical areas in IFRS S1 and IFRS S2, integrating input from stakeholder consultations and support provided by the TAC Secretariat. While primarily technical, they also encompass implementation-related matters, in particular, interoperability which complements certain technical considerations.
4To facilitate prioritisation and effective communication, the TAC Secretariat has organised the matters as suggested amendments, matters requiring clarification, matters for engagement, considerations for future standards and matters for ongoing monitoring.
Suggested amendments for the creation of UK Sustainability Reporting Standards
5These matters meet the threshold for amendments as outlined in paragraphs 16–17 of the Technical assessment and endorsement recommendation report. Four jurisdiction-specific amendments have been identified and are included in the communication to the ISSB for information purposes only.
Clarification, acknowledgement, educational material or guidance
6This category holds the majority of the identified issues. It represents requests for the ISSB to provide further insights, interpretations or examples to support consistent application of the standards and reduce unnecessary cost or effort. These matters have been prioritised on a low, medium or high scale.
Matters for engagement
7These matters require the ISSB to collaborate with other standards setters, regulators and others for resolution. For instance, interoperability issues may necessitate collaboration with other standard setters like the European Financial Reporting Advisory Group (EFRAG), the UK Government and regulators like the Financial Conduct Authority (FCA).
Considerations for future standards development and enhancements
8These forward-looking issues are intended to guide the development of new standards or enhancements to existing ones, ensuring compatibility, consistency, and relevance over time.
Monitoring
9These are areas where the TAC recommends ongoing observation as practices evolve. While no immediate action is required, they are included in the communication for the ISSB's awareness.
Criteria for prioritisation
10Recognising the ISSB's various commitments, matters requiring clarification, acknowledgement, educational material or guidance in appendix 2, part B have been prioritised as follows:
- High: Matters requiring immediate resolution due to their impact or critical significance to particular sectors or stakeholder groups
- Medium: Matters requiring attention but can be mitigated in the short term by existing measures or interim practices
- Low: Matters that can be addressed progressively as practice evolves
Engagement with the PIC and FCA
11It is recommended that the TAC promptly shares these matters with the ISSB to facilitate timely consideration and resolution of the ISSB, particularly for high priority matters. Whilst it is acknowledged that the FCA and UK Sustainability Disclosure Policy and Implementation Committee (PIC) may have additional issues to raise directly with the ISSB related to their activities and development of implementation requirements for companies in their respective remits, a complete list of these matters will not be available until later in 2025. It should also be noted that the FCA and PIC (via a DBT representative) have observer roles in the TAC and have participated in meetings and discussions related to the matters set out in appendix 2.
Next steps
12Finalise letter for submission to the ISSB subject to comments from TAC members 13Issue letter to the Chair of the ISSB 14Determine the monitoring mechanism
Questions for the TAC
- Does the TAC agree with the format of the appended letter and matters?
- Does the TAC have any comments on the prioritisation of matters?
- Does the TAC have any comments on the next steps?
- Does the TAC have any other comments to raise on the letter and related appendix?
Appendix 1 – Draft letter to the ISSB
The Chair Mr Emmanuel Faber International Sustainability Standards Board (ISSB) Columbus Building 7 Westferry Circus London, E14 4HD
xx xxx 2025
UK endorsement of IFRS S1 and IFRS S2
Dear Emmanuel,
The UK Sustainability Disclosure Technical Advisory Committee (TAC) recently submitted its technical assessment and endorsement recommendations report to the UK Government regarding the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB), namely IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and IFRS S2 Climate-related Disclosures (IFRS S2).
The TAC's comprehensive technical assessment of these standards, supported by extensive stakeholder consultations and deliberations, identified some key matters requiring the ISSB's attention. These matters are detailed in the attached appendix and are being formally shared for your consideration. We would be happy to discuss further with you. The matters have been categorised in the following areas:
- Suggested amendments for creation of UK Sustainability Reporting Standards (UK SRS)
- Matters that require clarification, acknowledgement, educational material or guidance
- Matters for engagement
- Considerations for future standards development and enhancements
- Matters for monitoring and feedback
The matters have been prioritised based on their urgency and significance as follows:
- High: Matters requiring immediate resolution due to their broad impact or critical significance to particular sectors or stakeholder groups
- Medium: Matters requiring attention but can be mitigated in the short-term by existing measures or interim practices
- Low: Matters that can be addressed progressively as practice evolves
We look forward to continuing our collaboration with you and your team as IFRS S1 and IFRS S2 progress through the adoption process in the UK.
Thank you for your attention to these important matters.
Yours sincerely
Sally Duckworth Chair of the UK Sustainability Disclosure TAC Email: [email protected]
Appendix 2 – Summary of matters for the ISSB's consideration
A. Suggested amendments for creation of UK Sustainability Reporting Standards – for information only
| Item no. | Topic per TAC report | Standard name | Summary of amendments for your information | Reference to TAC material |
|---|---|---|---|---|
| A.1 | Transition reliefs | IFRS S1 | Considering the relatively advanced state of climate reporting in the UK and the need to maintain connectivity between sustainability-related reporting and the financial statements, the TAC recommended the removal of the transition relief in IFRS S1 paragraph E4 that permits, in the first year of reporting, an entity to report its annual sustainability-related disclosures after it has published the related financial statements. | TAC report paragraph 233 & Appendix 5 |
| A.2 | IFRS S1 | The TAC recommended extending the 'climate-first' relief from one to two years allowing UK entities to fully disclose all sustainability-related risks and opportunities by the third year of reporting. This sufficiently prioritises climate-related disclosures (including Scope 3 emissions) before introducing non-climate sustainability-related reporting requirements. | TAC report paragraphs 237-238 & Appendix 5 | |
| A.3 | Effective date | IFRS S1 and IFRS S2 | Noting that the effective date in IFRS S1 and IFRS S2 has already passed, the TAC recommended its removal from the UK Sustainability Reporting Standards (UK SRS). The effective date in the UK will instead be determined by the Financial Conduct Authority (FCA) and the UK Government, who are responsible for the implementation of these standards. | TAC report paragraph 241 & Appendix 5 |
| A.4 | Greenhouse gas emissions: financed emissions | IFRS S2 | The TAC recommended an amendment to IFRS S2 paragraphs B62 and B63 so that UK entities are not required to use the Global Industry Classification Standard (GICS) when disaggregating gross financed emissions by sector/industry classification but might use GICS or a different classification system they use for existing regulatory or financial reporting purposes. Not mandating one commercial classification system is intended to improve consistency and maintain connectivity within the entities' own reporting while reducing transition costs for entities already using alternative classification systems that align with existing regulatory or financial reporting frameworks. | TAC report paragraph 191 & Appendix 5 |
B. Matters that require clarification, acknowledgement, educational material or guidance – for consideration
| Item no. | Topic per TAC report | Standard name | Summary of matters for consideration | Priority level | Reference to TAC material |
|---|---|---|---|---|---|
| B.1 | Greenhouse gas emissions: financed emissions | IFRS S1 and IFRS S2 | The TAC recommends that the ISSB provide written clarification to acknowledge that where a reporting entity determines that it is impracticable to provide a reliable and decision-useful estimate of its financed emissions using loans and investments for the current reporting period end due to constrained timelines, that the current industry practice of reporting financed emissions using the latest available reliable information for a previous period, clearly labelled as such, is not inconsistent with the requirements of IFRS S1 and IFRS S2. This information can provide users with the most recent reliable information which is considered to be decision-useful for the reporting entity and users of the information. Note that the reporting entity would always be required under these circumstances to disclose how it is managing its Scope 3 greenhouse gas emissions in accordance with IFRS S2 paragraph B57, and the financed emissions information for a previous reporting period would be considered as additional information. | High | TAC report paragraphs 192-195 |
| B.2 | Commercially sensitive information | IFRS S1 | The TAC notes that protections are necessary to prevent the disclosure of information that could be seriously prejudicial. However, some information may be exempt from disclosure in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets paragraph 92 but is required to be disclosed in accordance with IFRS S1. Therefore, the TAC recommends the ISSB to provide clarification on such an inconsistency. | High | TAC report paragraphs 132; 134-135 |
| B.3 | Greenhouse gas emissions: GHG Protocol and measurement methods | IFRS S2 | The TAC recommends that the ISSB provides clarification and guidance in relation to the requirement in IFRS S2 paragraph 29(iv) to disaggregate Scope 1 and Scope 2 emissions between the consolidated accounting group and other investees. In particular, the TAC highlights that the flexibility in reporting boundary approach provided by the GHG Protocol Corporate Standard might not align with the requirement to disaggregate greenhouse gas emissions by associates and joint ventures, especially if the ISSB expects the entity to take the same approach that is used in preparing financial statements. | High | TAC report paragraphs 165 & 173 TAC paper 2024-TAC-013 (par 22-28) for comprehensive analysis. |
| B.4 | Greenhouse gas emissions: Scope 3 greenhouse gas emissions | IFRS S2 | The TAC notes that it would be helpful to encourage more consistency in how Scope 3 emissions are presented within sectors, while allowing entities the flexibility to adapt their reporting based on their own specific contexts. Scope 3 emissions are likely to benefit from industry-based guidance that reflects the types of assets or business activities that could determine which Scope 3 categories are material. Therefore, the TAC recommends that the ISSB and GHG Protocol develop further industry-based guidance for Scope 3 emissions reporting, specifically to be more prescriptive about which of the Scope 3 categories might be relevant to different industries and sectors (including how leased assets are treated) to improve the quality and consistency of reporting. | Medium | TAC report paragraphs 175 & 180 |
| B.5 | Judgements, uncertainties and errors, including revising comparatives | IFRS S1 and IFRS S2 | Sustainability-related data quality continues to develop, particularly data from third parties (e.g. customers and suppliers), and there will be a natural evolution in data quality over time. In light of this, the TAC recommends that the ISSB develop guidance on the requirements to revise comparatives that would support the application of the standards. This guidance could include information about how entities treat changes in data quality and how to determine whether these changes represent changes in estimates rather than errors. This could cover the differences between changes in estimates and errors, and the difference between restatements and revisions, and how this might affect an entity's assessment of what information is considered material. | Medium | TAC report paragraphs 137 & 142-143 |
| B.6 | Current and anticipated financial effects | IFRS S1 and IFS S2 | The TAC recommends that the ISSB develop further guidance and worked examples on current and anticipated financial effects, including how to determine when information about the combined financial effects 'would not be useful', as required by IFRS S1 paragraph 40(c) and IFRS S2 paragraph 21(c). The implementation of this mechanism in similar circumstances might result in different assessments and conclusions being reached by different entities in making these disclosures. Additional clarity and guidance in this area would ensure that entities apply these mechanisms in a consistent and comparable way. | Medium | TAC report paragraphs 159 & 163 |
| B.7 | Cross-industry metrics (other than GHG emissions) | IFRS S2 | The TAC highlights concern that information in the financial statements and cross-industry metrics might be inconsistent, which would mean that there is a lack of connectivity between the two sets of information. It is understandable that sustainability-related reporting might use a range of estimates in some cases, whereas reporting of recognised amounts in the primary financial statements requires the disclosure of a single point estimate. As such, there is an expected difference between sustainability-related information and information in the financial statements. Therefore, the TAC recommends that the ISSB provide guidance, which could be joint ISSB/IASB guidance, around how entities deal with these differences between the information disclosed relating to the cross-industry metrics and the information in the financial statements. The ISSB could also consider alignment with IASB literature, notably IFRS 9 Financial Instruments, where there is existing practice on how to use multiple scenarios. | Medium | TAC report paragraphs 200 & 202-203 |
| B.8 | Targets | IFRS S2 | The TAC recommends that the ISSB clarify the term 'targets' and the way it differs from other terms like 'ambitions', commitments' and 'milestones'. The ISSB could develop further guidance and worked examples on these terms. There might also be a link between these terms and time horizons, which the TAC considered in its deliberations on identifying potential sustainability-related risks and opportunities. Additional clarity and guidance in this area could ensure that entities apply these terms in a consistent and comparable way. | Low | TAC report paragraphs 211 & 215 |
| B.9 | Transition plans | IFRS S2 | The TAC notes the ISSB announced that it has assumed responsibility for the Transition Plan Taskforce (TPT) disclosure-specific material. Therefore, the TAC encourages the ISSB to expedite the use of TPT disclosure-specific materials to develop educational material that enhances the application guidance in IFRS S2 to support entities in disclosing transition plan information. | Low | TAC report paragraphs 223-224 |
| B.10 | Timing of reporting | IFRS S2 | The TAC recognises the helpful permission in IFRS S2 paragraph B19 that allows an entity to use information from a different reporting period for greenhouse gas emissions data from entities in its value chain. Recognising that this permission in IFRS S2 can be applied under specific conditions for value chain data, the TAC recommends the ISSB to consider how this permission can be applied to sustainability-related matters other than greenhouse gas emissions. This might be through clarification of the existing requirements or as part of the upcoming research on biodiversity, ecosystems and ecosystem services and human capital. | Low | TAC report paragraphs 120 & 126-127 |
| B.11 | Greenhouse gas emissions: GHG Protocol and measurement methods | IFRS S2 | There is need for clarity on how the ISSB will update the reference in IFRS S2 to the upcoming revised GHG Protocol Corporate Standard from the currently referenced 2004 version. | Low | TAC report paragraph 169 |
C. Matters for engagement – for consideration
| Item no. | Topic per TAC report | Standard name | Summary of matters for consideration | Reference to TAC material |
|---|---|---|---|---|
| C.1 | Interoperability | IFRS S1 and IFRS S2 | TAC supports continued efforts towards greater global alignment and interoperability and recommends the engagement of the ISSB, UK Government and the European Financial Reporting Advisory Group (EFRAG) on interoperability challenges and the potential for equivalence. | TAC report paragraphs 82-85 |
| C.2 | Greenhouse gas emissions: GHG Protocol and measurement methods | IFRS S2 | Consistent with the details in matters for clarification item B.3, the TAC recommends that the ISSB and EFRAG resolve discrepancies between IFRS S2 and European Sustainability Reporting Standards E1 Climate change (ESRS E1), especially regarding the requirements to disaggregate Scope 1 and Scope 2 emissions. | TAC report paragraphs 165 & 173 TAC paper 2024-TAC-013 (par 22-28) for comprehensive analysis |
| C.3 | IFS S1 and IFRS S2 | The TAC is open to engaging with both the ISSB and GHG Protocol to ensure a review of the GHG Protocol Corporate Standard and its governance is undertaken thoroughly and swiftly to assess its suitability as part of IFRS S2, including its compatibility with the principles in IFRS S1, for example, alignment of reporting boundary entities. | TAC paper 2024-TAC-013 (par 22-28) for comprehensive analysis | |
| C.4 | Sources of guidance | IFRS S1 and IFRS S2 | Given the varied stakeholder and TAC's views on SASB materials, the TAC is open to engaging with the ISSB on the enhancement of the SASB materials. | TAC report paragraphs 103 & 106-109 |
D. Considerations for future standards development and enhancements – for consideration
| Item no. | Topic per TAC report | Standard name | Summary of matters for consideration | Reference to TAC material |
|---|---|---|---|---|
| D.1 | Reporting entity boundary and consolidated reporting | IFRS S1; IFRS S2 and other future topic-specific standards | The TAC notes the flexibility in IFRS S2 that allows entities to select a reporting entity boundary approach when using the GHG Protocol Corporate Standard to measure greenhouse gas emissions. It is observed that in practice the operational control approach is often used for sustainability-related disclosures. Although the TAC recommends that this flexibility in IFRS S2 be maintained for now, it emphasises that the preferred approach would be the same reporting boundary approach that is used for financial reporting as required in IFRS S1, to facilitate alignment with the financial statements. Therefore, the TAC encourages the ISSB to consider this alignment when updating IFRS S1 and IFRS S2 and in developing future topic-specific standards. | TAC report paragraphs 147 & 152 |
| D.2 | Greenhouse gas emissions: financed emissions | IFRS S2 | IFRS S2 paragraph 29(a)(i)(3) requires an entity to disclose its absolute gross Scope 3 greenhouse gas emissions generated during the reporting period, including upstream and downstream emissions. While the TAC observes that entities should use existing guidance provided by established industry standards on the expected level of coverage of emissions included in financed emissions disclosures, the level of appropriate coverage remains a challenging area for entities. Therefore, when updating the Industry-based Guidance on implementing Climate-related Disclosures, the TAC encourages the ISSB to provide industry-specific guidance that supports entities in understanding how to collect financed emissions data, including the expected level of coverage of emissions included in the absolute gross figure. | TAC report paragraph 183 |
| D.3 | Resilience and scenario analysis | IFRS S1 and other future topic-specific standards | The TAC recommends that in developing the ISSB's future topic-specific standards, that the ISSB considers:
|
E. Matters for monitoring and feedback – for information only
| Item no. | Topic per TAC report | Standard name | Summary of matters for your information | Reference to TAC material |
|---|---|---|---|---|
| E.1 | Materiality | IFRS S1 and IFRS S2 | The TAC stresses the importance of not overly prescribing or defining what information is considered material as there is value in entities assessing and deciding what is material for their primary users. The TAC considered the benefit of requesting additional guidance from the ISSB to support entities in applying the concept of materiality to sustainability-related information and acknowledges the recently published ISSB educational material on sustainability-related risks and opportunities and the disclosure of material information. However, the TAC has not yet assessed this. The TAC believes that if a need is identified for further educational material or revisions to standards on the application of materiality, the ISSB should be encouraged to develop this. | TAC report paragraphs 91 & 97 |
| E.2 | Timing of reporting | IFRS S1 and IFRS S2 | The TAC recognises the permission in IFRS S2 paragraph B19 that allows an entity to use information from a different reporting period for greenhouse gas emissions data from entities in its value chain. However, some TAC members observed that the condition that 'the length of the reporting periods is the same' might not fully align with an entity's need to collect information from the value chain for a longer or shorter period depending on the nature of the information and the activity to which the information relates. Therefore, the TAC recommends that practice relating to the use of different reporting periods for information from entities in the value chain for sustainability-related disclosures is observed and fed back to the ISSB as part of its post-implementation review. | TAC report paragraphs 121 & 127 |
| E.3 | Judgements, uncertainties and errors, including revising comparatives | IFRS S1 and IFRS S2 | Consistent with the details in matters for clarification item B.5, the TAC recommends that market practice relating to judgements, measurement uncertainty, errors and revising comparative amounts due to changes in estimate be monitored to provide feedback to the ISSB during its post-implementation review of IFRS S1. | TAC report paragraphs 139; & 142-143 |
| E.4 | Current and anticipated financial effects | IFRS S1 and IFRS S2 | Consistent with the details in matters for clarification item B.6, the TAC recommends that market practice related to current and anticipated financial effects, including the use of mechanisms to support the application of the requirements, is an area for continued monitoring to provide feedback to the ISSB during its post-implementation review of IFRS S1 and IFRS S2. | TAC report paragraphs 160 & 163 |
| E.5 | Greenhouse gas emissions: financed emissions | IFRS S1 and IFRS S2 | Given that there is currently no standardised methodology for the calculation of financed emissions for undrawn facilities and that IFRS S2 allows entities to determine their approach to calculating financed emissions, the TAC recommends that the development of global frameworks and standards for calculating financed emissions for different financial products be monitored as practice is established. | TAC report paragraphs 185 & 197-198 TAC paper 2024-TAC-013 (par 22-28) for comprehensive analysis. |
| E.6 | IFRS S1 and IFRS S2 | Given the complexity of disaggregating and reporting financed emissions, the TAC recommends that the development of practice of reporting financed emissions be monitored and fed back to the ISSB when it conducts its post-implementation review of IFRS S2. | TAC report paragraphs 188 & 199 | |
| E.7 | Targets | IFRS S1 and IFRS S2 | Consistent with the details in matters for clarification item B.8, the TAC recommends that market practice related to targets be monitored to provide feedback to the ISSB during its post-implementation review of IFRS S1 and IFRS S2. This includes monitoring the use and disclosure of carbon credits and the connectivity between targets and identified risks and opportunities to understand whether any amendments to the standards are required in the future. | TAC report paragraphs 212 & 215-216 |
| E.8 | Proportionality mechanisms and permanent reliefs | IFRS S1 and IFRS S2 | The TAC notes with concern that the standards do not always require entities to disclose which proportionality mechanisms have been used, which could lead to unexplained gaps or omissions in the disclosures. It would be helpful for users to understand when a mechanism has been applied to explain why a different approach has been taken by an entity. For example, it would be useful for users to understand why an entity only provided qualitative information about the current and anticipated financial effects of sustainability-related information if the entity has applied this permanent relief that is available in the standards. Therefore, the TAC recommends that the application of the proportionality mechanisms be monitored as practice develops, and observations are shared with the ISSB during its post-implementation review of IFRS S1 and IFRS S2. | TAC report paragraphs 225; 228 & 230 |