Global:
Global voluntary standards for public sector climate-related financial disclosures
The International Public Sector Accounting Standards Board (IPSASB) published its draft of the world’s first voluntary disclosure standards for public sector climate-related disclosures [1] – covering aspects including climate transition plans, greenhouse gas emissions including Scope 3, and carbon credits for offsetting.
IPSASB SRS ED 1 requires companies to disclose information under two categories:
- Own operations: requirements about climate-related risks and opportunities that affect the entity’s ability to continue to provide its day-to-day activities and deliver on its public interest mandate.
- Public policy programmes: requirements about the climate-related public policy programmes related to international agreements and/or national commitments.
Proposed disclosure requirements are adapted from the TCFD and IFRS S2 and are based on four pillars – governance, strategy, risk management, and metrics and targets.
TCFD annual review by the IFRS Foundation
The International Financing Reporting Standards (IFRS) Foundation published its first Taskforce on TCFD annual review [2]. The report highlights progress of companies against the TCFD’s 11 recommended climate-related disclosures.
Key findings of the report include:
- The requirements in IFRS S2 integrate and are consistent with the TCFD recommendations. Companies using ISSB Standards provide information covered by the TCFD recommendations.
- Most asset managers and owners want or expect portfolio companies to make the transition from disclosures prepared using TCFD recommendations to ISSB standards.
IFRS sustainability-related risks and opportunities guide
IFRS Foundation published a comprehensive guide [3] to assist companies with identifying and disclosing material information about sustainability-related risks and opportunities that could affect capital flows.
This educational material is divided into three chapters:
Chapter 1: Defining material information in ISSB standards
Explores the key components of ‘material information’ and its application in ISSB standards, focusing on making materiality judgements.
Chapter 2: Sustainability-related risks and opportunities
Explains sustainability-related risks and opportunities, their potential impact on an entity’s prospects, and their application in ISSB standards using examples and key considerations.
Chapter 3: Identifying and disclosing material information
Builds on the previous chapters to outline the process for identifying and disclosing material information about sustainability-related risks and opportunities, referencing ISSB standards guidance.
IOSCO report on transition plans
IOSCO published its Report on Transition Plans [4] setting out how transition plan disclosures can support the objectives of investor protection and market integrity. The report highlights several key challenges relating to transition plan disclosures such as:
- Lack of common definition of transition plans and information gaps in existing disclosures.
- Lack of global transition plan-specific disclosure guidance, including for financial institutions.
- Uncertainty for entities around the disclosure of forward-looking information, e.g. concerns about liability risks.
And four main focus areas:
- Ensuring consistency and comparability of transition plan disclosures.
- Promoting their assurance.
- Enhancing legal and regulatory clarity and oversight.
- Building capacity.
Interoperability between EFRAG and CDP guidance
The EFRAG and CDP announced interoperability between CDP’s questionnaire and the ESRS climate standard (ESRS E1) [5]. Both announced plans to publish mapping guidance between the ESRS and CDP questionnaire in early 2025.
IAASB’s ISSA 5000 – new framework for sustainability assurance
The International Auditing and Assurance Standards Board (IAASB) introduced the International Standards on Sustainability Assurance ISSA 5000 [6].
The global standard aims to support both limited and reasonable assurance engagements and align with traditional and double materiality concepts. ISSA 5000 aligns with EU’s CSRD and supports various sustainability frameworks including ISSB IFRS and GRI.
Update on ESG risk disclosures under Basel III
In an update on the implementation of Basel III [7], the Basel committee stated that work is continuing on the Pillar 3 disclosure framework for climate-related financial risks and anticipates the finalisation of this work in the first half of 2025.
PCAF consultation on new methodologies for the Global GHG Accounting and Reporting Standard
PCAF has released [20] two documents for consultation (open until 28 February 2025):
Part A: Updates to financed emissions measurement:
- New methods for public consultation:
Use of proceeds accounting
Securitised and structured products
Sub-sovereign debt
- Guidance on avoided emissions and forward-looking metrics: Supporting financial institutions in reporting avoided and expected emissions reductions (EER) across asset classes.
- Inventory fluctuations: Exploring approaches to address inventory impacts on financed emissions.
- Undrawn loan commitments: Proposed calculation method aligning with IFRS S2 for emissions from undrawn loan commitments.
Part C: Expansion to insurance sector
Methods for project insurance and treaty reinsurance to enhance emissions measurement for the international insurance sector.
Financial Markets Standards Board (FMSB) statement of good practice for SLPs
The working group which delivered the statement was chaired by NatWest. The statement [27] is intended to codify good practices for the governance of SLPs and support the adoption of consistent governance approaches across asset classes and jurisdictions. Enhancing governance practices for SLPs can help to improve the quality and integrity of SLPs; mitigate social or greenwashing risks; increase market confidence and investor trust in such instruments; and support the development of a deeper, more robust sustainability-linked product market. The statement is intended to apply to service providers or users of SLPs in wholesale financial markets and to support, and be read in conjunction with, existing asset-class specific guidance (notably ICMA, LMA and ISDA principles). The statement is open for consultation until 21 February 2025.
UK:
SDR and investment labels: pre-contractual disclosure examples
The FCA published additional guidance on the SDR and investment labels regime [8], including examples of pre-contractual disclosures. These non-exhaustive examples, drawn from the FCA’s experience with label applications to date, aim to help firms align their sustainability labels with regulatory expectations and transparency standards. The SDR and investment labels regime officially took effect on 2 December 2024, though firms have been permitted to use the labels since 31 July 2024.
UK green finance package
Chancellor Rachel Reeves made a number of announcements in her Mansion House speech on 14 November 2024 including on Sustainable Finance [9]:
UK research on the EU green taxonomy framework
Department for Business and Trade published a research paper on the EU green taxonomy framework (conducted in 2023) [10]. The study aimed to identify key challenges and cost drivers in reporting, examine how disclosed information is utilised, and highlight significant market gaps that could be addressed through these disclosures. Insights were gathered through in-depth interviews with reporting corporates, financial institutions, consultancy firms, and data providers.
UK clean power 2030 action plan
The UK Government published a detailed plan [11] for achieving the target of clean power by 2030 – also aiming to lower energy bills, boost energy security, and create skilled jobs. The initiative includes reforms to energy infrastructure planning, prioritisation of critical projects, and faster grid connections, targeting £40bn annually in private investment to drive sustainability and economic security.
Principles for voluntary carbon and nature market integrity
The UK government has published principles to guide responsible participation in voluntary markets for carbon and nature credits [12]. These markets involve the voluntary production and purchase of credits, separate from legal compliance schemes like the UK Emissions Trading Scheme. The principles address concerns about the quality and integrity of certain credits and their use in environmental impact claims. They outline the government’s approach to high-integrity credits and how businesses and organisations can use them responsibly to achieve their climate and environmental goals. For more information, see the dedicated article by our Carbon Markets colleagues.
The UK government report on Scope 3 reporting
The UK government conducted a call for evidence on the costs, benefits, and practicalities of Scope 3 greenhouse gas (GHG) emissions reporting [13], focusing on aligning with ISSB standards and reviewing the Streamlined Energy and Carbon Reporting (SECR) framework. Responses from 184 stakeholders, including businesses and investors, highlighted challenges such as data availability and methodology inconsistencies but emphasised strong demand for Scope 3 reporting, with benefits outweighing costs. The findings will inform government decisions on endorsing ISSB standards and potential updates to the SECR framework to enhance transparency and accountability in emissions reporting.
EU:
ESMA clarification on exclusion rules for green bonds in ESG funds
On 13 December 2024, ESMA published [21] three new Q&As with further details on the application of the recent guidelines on “funds’ names using ESG or sustainability-related terms” published in May 2024. Under the rules, ESG-named funds must apply entity level exclusions according to the Low Carbon Benchmark Regulation (“PAB exclusions”, e.g. based on exposures to coal, O&G, etc.). Read our article on this topic here.
The Q&A addressed the entity level exclusions for green and other use of proceeds bond issuers, the interpretation of “meaningfully investing in sustainable investments” requirement and the definition of controversial weapons.
Regarding green and other use of proceeds bonds, ESMA noted that investments in European green bonds issued under the European Green Bond Standard, do not need to be assessed under the exclusions rule set by the guidelines. For other use-of-proceeds bonds, fund managers may use a “look-through approach” to assess whether the activities financed are relevant for the exclusions.
We have summarised the application in the table below:
