With the three commitments of the IFRS Foundation Trustees at COP26 now fulfilled, the Taskforce on Climate-related Financial Disclosures (TCFD) was officially disbanded at COP28, which was held in Dubai in November/December 2023.
The three commitments from COP26 included:
- The IFRS Foundation to establish the International Sustainability Standards Board (ISSB) whose mission is to deliver a global baseline of sustainability-related financial disclosure standards for the capital markets
- To consolidate the investor-focused sustainability disclosure landscape, noting the crucial importance of interconnectivity between financial and sustainability disclosure reporting
- To publish the first two prototype sustainability reporting standards, on general requirements disclosures and climate related disclosures.
With the publication of the ISSB’s first two sustainability standards (IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures) in June 2023, and their subsequent endorsem*nt by the International Organization of Securities Commissions (IOSCO) in July 2023, the TCFD has fulfilled its remit, and was officially disbanded at COP28.
The TCFD website will remain available to serve as a resource for materials developed by the Task Force but will no longer be updated or monitored.
Are IFRS S1 and IFRS S2 the same as the TCFD recommendations?
The four core recommendations of TCFD reporting (that is, governance, strategy, risk management, and metrics & targets) have been incorporated into IFRS S1 and IFRS S2. However, there are some differences between IFRS S2 and the TCFD recommendations. While the TCFD recommendations provide a good stepping stone to adopting IFRS S2, IFRS S2 goes further than the TCFD recommendations and requires more extensive disclosures. Please refer to the ISSB’s comparison of key differences between the TCFD recommendations and IFRS S1 and IFRS S2.
Status of TCFD recommendations in Australia
Until final climate reporting is mandatory in Australia, Australian listed entities must comply with TCFD disclosures in their annual reports. Our TCFD checklist can assist you with this.
Our previous article shows how the ASX Corporate Governance Principles and Recommendations, section 299A of the Corporations Act 2001, and ASIC Regulatory Guide 247 Effective disclosure in an operating and financial review, all require listed entities to provide disclosure about climate risks that could have a material impact on the entity’s future financial position, performance and prospects. These sources also strongly encourage listed entities to follow the TCFD recommendations when making these disclosures.
At the date of this publication, the Australian Government had published Draft legislation to mandate sustainability reporting in Australia and the Australian Accounting Standards Board issued its Exposure Draft seeking feedback on its proposals to issue an Australian version of IFRS S1 and IFRS 2. Until final legislation and standards provide a certain roadmap for mandatory climate reporting in Australia, listed entities should continue to comply with the TCFD’s recommended disclosures.
How BDO can help
No matter where you are on your sustainability journey, our national team of sustainability experts can help with:
- Preparation of TCFD reports, or broader sustainability reporting as required
- Developing your sustainability strategy
- Carbon footprint calculations or mandatory climate-related disclosures
- Carbon emission reduction strategies
- Assurance over your carbon footprint or sustainability reporting.
Contact us today.
Learn more about the TCFD recommendations
Our free course, TCFD Explained - overview and examples in practice, introduces the TCFD recommendations.
We've also prepared a consolidated checklist incorporating the recommended disclosures and 'guidance for all sectors' across the four core elements to help organisations as they embark on TCFD reporting.
