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TNFD Publishes Additional Sector and Value Chain Guidance

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The Taskforce on Nature-related Financial Disclosures (TNFD) has released additional guidance covering eight real economy sectors, updated additional guidance for financial institutions, and guidance on value chains. These resources are designed to help companies implement the TNFD Recommendations more effectively. The TNFD Recommendations are structured around four core pillars: (i) Governance, (ii) Strategy, (iii), Risk and Impact Management, and (iv) Metrics & Targets. They are aligned with the International Sustainability Standards Board’s IFRS Sustainability Standards, which incorporate the Task Force on Climate-related Financial Disclosures recommendations (see our earlier bulletin here). Additionally, the TNFD Recommendations support the goals and targets of the Kunming-Montreal Global Biodiversity Framework (see our earlier bulletin here). TNFD also announced that it has experienced a surge in adoption, with a 30% increase in companies implementing its reporting recommendations since January. This growth is attributed to 96 additional firms committing to TNFD’s nature-related disclosure framework, bringing the total number of committed firms to 416. This bulletin provides a brief overview of the TNFD’s additional guidance and important information about ongoing stakeholder consultations. Additional sector guidance. The TNFD recognizes significant sectoral differences for corporations implementing the TNFD’s ‘LEAP’ (Locate, Evaluate, Assess and Prepare) approach. To address this variation, it has provided additional sector-specific guidance that is supplemental and intended to complement the TNFD’s Guidance on assessment of nature-related issues: the LEAP approach. The additional guidance offers detailed instructions on applying the TNFD core global disclosure metrics, core sector metrics, and the LEAP approach within the following sectors: Aquaculture; Biotechnology and Pharmaceuticals; Chemicals; Electric Utilities and Power Generators; Food and Agriculture; Forestry and Paper; Metals and Mining; and Oil and Gas. Additional guidance for financial institutions. The updated additional guidance for financial institutions (version 2.0) provides additional guidance for financial institutions to apply the TNFD Recommendations, and is applicable to…

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ISSB Publishes Exposure Drafts for Climate and Sustainability Disclosure

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The International Sustainability Standards Board (ISSB), a standard-setting board of the IFRS Foundation, has published Exposure Draft IFRS S2 Climate-related Disclosures (the Climate Exposure Draft) and Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (the Sustainability Exposure Draft). The Climate Exposure Draft is based on the recommendations of the Task Force on Climate-Related Financial Disclosure and incorporates industry-based disclosure requirements from the SASB Standards. The Sustainability Exposure Draft provides overall requirements for disclosing sustainability-related financial information about significant sustainability-related risks and opportunities. This bulletin provides key information on both documents and the recently launched consultations.  Climate Exposure Draft Objective. The objectives of the Climate Exposure Draft include, among others, requiring disclosure of information about exposure to significant climate-related risks and opportunities, enabling users of an entity’s general purpose financial reporting to: Assess the effects of significant climate-related risks and opportunities on enterprise value. Understand how the use of resources, and corresponding inputs, activities, outputs and outcomes support responses to and strategy for managing significant climate-related risks and opportunities. Evaluate the ability to adapt planning, business model, and operations to significant climate-related risks and opportunities. Enable users of general-purpose financial reporting to understand the governance processes, controls, and procedures used to monitor and manage climate-related risks and opportunities and the strategies for addressing significant climate-related risks and opportunities. Scope. The Climate Exposure Draft would apply to climate-related risks an entity is exposed to including physical and transitional risks, and climate-related opportunities available to an entity. Sustainability Exposure Draft Objective. The objectives of the Sustainability Exposure Draft include, among others: Require disclosure of significant sustainability-related risks and opportunities useful to the primary users of general purpose financial reporting when assessing enterprise value and deciding whether to provide resources. Require disclosure of material information about exposure to all significant…

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SEC Proposes Climate-related Disclosure Rules

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The Securities and Exchange Commission (SEC) yesterday proposed rule changes that would require climate-related disclosures in registration statements and periodic reports (the Proposed Rule). The Proposed Rule is similar to other disclosure frameworks including the recommendations of the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol. This bulletin summarizes key, high-level details of the Proposed Rule, which is over 500 pages in length:   Required climate-related disclosure. The Proposed Rule would require registrants to disclose: the oversight and governance of climate-related risks by the board and management; how any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements, which may manifest over the short-, medium-, or long-term; how any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook; the registrant’s processes for identifying, assessing, and managing climate-related risks and whether any such processes are integrated into the registrant’s overall risk and management system or processes; the impact of climate-related events and transition activities on the line items of a registrant’s consolidated financial statements, and disclosure of financial estimates and assumptions impacted by such climate-related events and transition activities; Scope 1 and 2 emissions and Scope 3 emissions in specific circumstances;  carbon offsets and renewable energy credits or certificates (RECs); any  internal carbon price; and any climate-related targets, goals, and transition plans. Scope 1, 2, and 3 emissions. The Proposed Rule would require the disclosure of a registrant’s Scope 1 and 2 emissions in disaggregated constituent GHGs and in the aggregate, as well as in absolute and intensity terms. Scope 3 emissions and intensity would be disclosable only if material or where a registrant has set a GHG emissions target or goal that includes Scope 3 emissions. The SEC notes that the…

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CSA Proposes Climate-related Disclosure Requirements

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The Canadian Securities Administrators (CSA) yesterday published the proposed National Instrument 51-107 Disclosure of Climate-related Matter (the Proposed Instrument) and a companion policy addressing the need for climate-related disclosure requirements. The Proposed Instrument seeks to provide consistent and comparable climate-related disclosure information for investors and is mostly aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. This bulletin briefly summarizes the Proposed Instrument and highlights key differences with the TCFD recommendations.  Disclosure requirement of the Proposed Instrument. The Proposed Instrument would require disclosure consistent with the core elements in the TCFD recommendations as follows: Governance. Reporting issuers would be required to describe: board oversight of climate-related risks and opportunities; and management’s role in assessing and managing climate-related risks and opportunities. Strategy. Reporting issuers, where material, would be required to describe: climate-related risks and opportunities the issuer has identified over the short, medium, and long term; and impact of climate-related risks and opportunities on the issuer’s businesses, strategy, and financial planning. Risk management. Reporting issuers would be required to describe: the issuer’s processes for identifying and assessing climate-related risks; the issuer’s processes for managing climate-related risks; and how processes for identifying, assessing, and managing climate-related risks are integrated into the issuer’s overall risk management. Metrics and targets. Reporting issuers would be required to disclose: the metrics used by the issuer to assess climate-related risks and opportunities in line with its strategy and risk management process where such information is material; Scope 1, Scope 2, and Scope 3 GHG emissions, and the related risks or the issuer’s reasons for not disclosing this information; and the targets used by the issuer to manage climate-related risks and opportunities and performance against targets where such information is material. Modifications to the TCFD recommendations. The Proposed Instrument would not require issuers to provide a “scenario analysis”, which describes how resilient an…

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Ontario Capital Markets Taskforce Recommends Climate Disclosure; OSFI Climate Risk Consultations

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The Government of Ontario’s Capital Markets Modernization Taskforce (the Taskforce), launched in February 2020, today released its list of 74 recommendations to modernize Ontario’s capital markets regulation. The Taskforce recommends expanding the mandate of the Ontario Securities Commission (OSC) to include fostering capital formation and competition in the markets and changing the name of the OSC to the Ontario Capital Markets Authority.

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