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Financial risk and Climate related risk can be disclosed using the same standards

IFRS can already be used by companies to report on climate related risk, according to a report by the Climate Disclosure Standards Board (CDSB).

‘Uncharted waters: How can companies use financial accounting standards to deliver on the TCFD’s recommendations?’ explores how companies can use existing international accounting standards when implementing the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations and to bring more clarity about how sustainability and financial reporting can be connected.

The release of the paper follows the European Commission’s calls for the review of current International Financial Reporting Standards (IFRS) to assess their potential impact on sustainable investment, as outlined in the recent Action Plan on sustainable finance. 

The paper focuses on IFRS 7, 9, 15, 17 and IAS 36 and 37, exploring some of the main points applied to traditional financial instruments and how they could potentially help organisations disclose climate-related risks and opportunities within their mainstream reports.

The aim of the paper is to help companies’ financial departments interpret and implement those principles to climate reporting with the same rigour as financial reporting, and to help sustainability teams work with wider companies’ departments to implement the TCFD recommendations.

CDSB technical director Adam Peirce said: “The aim of this paper is to show that we can use the same language when talking about traditional business risks and opportunities and climate-related risks and opportunities.

“These accounting standards fundamentally share a similar purpose to the TCFD: informing investors and wider stakeholders of the material risks and opportunities that could affect a company’s financial position, which will ultimately help maintain long-term global financial stability.”

The report can be accessed here.

 

By Joe Pickard

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