Industry

Group of Five Releases Climate-Related Financial Disclosure Prototype

Proposed standard builds on TCFD pillars, supports IFRS consultation on non-financial reporting. 

Five international sustainability reporting bodies, known as ‘the group of five’, have published a prototype global standard for sustainability-related financial disclosures.  

Focused on climate-related disclosure, it is the first attempt by the five organisations to combine their existing standards frameworks to establish universal system for reporting the impact of sustainability factors on enterprise value. 

It follows a statement of intent penned by the five organisations – CDP, Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) – to work together toward a globally accepted comprehensive corporate reporting system.  

The group of five reiterated support for the consultation proposed by the trustees of the International Financial Reporting Standards (IFRS) Foundation, which suggested the implementation of a global-focused Sustainability Standards Board (SASB).  

The prototype “demonstrates how certain components of our current frameworks and standards, along with the recommendations set out by the Task Force on Climate-related Financial Disclosures (TCFD), can be used together to provide a starting point for the development of global standards for sustainability-related financial disclosure,” the report noted 

The prototype further builds on the “four pillars” outlined by TCFD recommendations: governance, strategy, risk management and metrics and targets. It will be the foundation of a “Prototype Sustainability-related Financial Disclosure Presentation Standard”.  

The report outlined three areas of focus. The “big lens” will focus on all sustainability matters that “reflect a company’s positive or negative contribution to sustainable development”. The “middle lens” will cover reporting on sustainability matters that “influence enterprise value”, i.e. financial returns to providers of financial capital. The “small lens” similarly focuses on sustainability matters that influence enterprise value “in so far as they affect monetary amounts accounted for and disclosed in the financial statements”.  

Following the launch of this paper, the five organisations are co-hosting a webinar in January 2021 to further outline the concepts and motivations behind the prototype.  

Coordination between the five sustainability reporting bodies is facilitated by the Impact Management Project, World Economic Forum and Deloitte. 

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