Complimenting the previously released educational guidance, the IFRS Foundation has published new educational material to help companies apply the ISSB Standards when disclosing anticipated financial effects of sustainability-related risks and opportunities.
This guidance supports the implementation of IFRS S1 and IFRS S2 and follows two webcasts released in May 2024. It’s designed to help reporting entities tell a clear story about how climate and other sustainability risks may affect their financial performance, position and cash flows over time.
The material is not intended to change the requirements of either Standard, but support entities when implementing them for the first time.
Disclosing anticipated financial effects when applying IFRS SDS
Investors are particularly interested in understanding the relationship between sustainability information and the information presented in a reporting entity’s financial statements. As a result, IFRS SDS require reporting entities to provide information about the current effects of sustainability-related risks and opportunities on its financial position, financial performance and cash flows, and the anticipated financial effects in the short, medium and long term.
The educational materials
This new guidance helps to explain:
- What anticipated financial effects are and why they matter
- How to connect disclosures with financial statements
- What information companies need to share, and when
- How to use both qualitative and quantitative data
- What to do when data is hard to get or measure, and
- When exemptions apply (eg legal or commercially sensitive cases).
It also includes five practical examples, showing how companies in different sectors might disclose anticipated financial effects—from flood risks to carbon pricing and e-waste opportunities.
Key takeaways of the new guidance
- Disclosures should reflect short, medium and long-term impacts
- Entities must use reasonable and supportable information available at the reporting date
- Entities can avoid duplication by cross-referencing financial statements
- Reliefs are available when financial effects are either not separately identifiable, or the level of measurement uncertainty is so high that resulting information would not be useful.
Our thoughts
We are pleased to see the ISSB continue to invest in the implementation of their sustainability disclosure standards, via the release of more educational materials. In our view, these materials will give entities useful guidance and help to apply the requirements set out in the IFRS SDS.
You can access the materials using the following link:
The links to previously issued materials can be accessed using these links:
- Using ISSB Industry-based Guidance when applying ISSB Standards
- Disclosing information about an entity’s climate-related transition, including information about transition plans, in accordance with IFRS S2
- Greenhouse Gas Emissions Disclosure requirements applying IFRS S2 Climate-related Disclosures, and
- Applying IFRS S1 when reporting only climate-related disclosures in accordance with IFRS S2.