About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

ISSB Assumption of TCFD Brings a Global Reporting Code a Huge Step Closer

Subscribe to our newsletter

The set of climate reporting recommendations that are regarded as the go-to guideline for national regulators, companies and financial institutions alike has become the latest major piece added to an emerging global sustainability disclosure framework.

From next year, companies that align with the Taskforce for Climate-related Financial Disclosures (TCFD) will be monitored by, and required to send their reports to, the International Sustainability Standards Board (ISSB).

In a major step towards the forging of a unified global code on climate reporting, the Financial Stability Board (FSB) – which formed the TCFD in 2015 – called on it to take over the responsibilities of the widely adopted standards setter. The integration was expected after the ISSB issued its first two sets of reporting standards, the IFRS S1 and IFRS S2, which fully incorporate the recommendations of TCFD.

“The TCFD has been a trailblazer in raising the practice and quality of climate-related disclosures, providing much-needed information to investors about climate-related risks and opportunities,” ISSB chair Emmanuel Faber said.

“The ISSB has built from and consolidated the market-leading investor-focused sustainability-reporting initiatives to deliver the ISSB Standards, with the TCFD recommendations at the heart of this. As such, the ISSB welcomes the FSB’s request to transfer the TCFD’s monitoring responsibilities to the ISSB from 2024 and the opportunity to build on TCFD’s legacy. This announcement provides yet further clarification of the so-called ‘alphabet soup’ of ESG initiatives for companies and investors.”

Convergence

The ISSB was created by the IFRS Foundation in 2021 with the intention of providing a global blueprint for companies to report their climate data. Financial institutions have long sought a single reporting framework to replace the almost 4,000 voluntary codes that dominate the ESG disclosures space. Inconsistencies in reporting standards has fed through in the data, presenting challenges to investors who need comparable metrics to make optimal decisions when constructing portfolios and risk-management policies.

It has also been seized upon by anti-ESG voices as a cause of greenwashing.

Since its creation, ISSB has begun absorbing the roles of other standards oganisations, including the Value Reporting Foundation’s Integrated Reporting Framework and industry-based SASB Standards, bringing a degree of convergence to global reporting.

De Facto Code

At the same time, the TCFD has become the de facto international framework for disclosing climate data. The G7 has supported its adoption by member states and regulators in the UK, US, Singapore and Australia are benchmarking their own climate reporting laws against it. Chaired by Michael Bloomberg, TCFD now has almost 4,000 companies explicitly following its recommendations.

At A-Team’s ESG Data and Tech Summit London this year, Slaughter and May head of EU financial regulation Sabine Dittrich said TCFD had become “mainstream”. More recently, 7 Centre chief executive Tanya Seajay hailed the TCFD for being forward-looking.

“You need a forward-looking lens to be able to anticipate risk and be prepared for those and to mitigate it and also to think about the opportunities associated with it,” Seajay told ESG Insight.

The TCFD’s recommendations, which were initially published in June 2017, are based on four core elements – governance of climate risks and opportunities; establishing the risks and opportunities inherent in businesses’ strategies; the processes used to identify, assess, and manage climate-related risks; and, the use of metrics and targets.

The issuance of S1 and S2 marked the “culmination of the work of the TCFD”, the FSB said in a statement. From next year, the board will assume the roles of the TCFD, which include tracking signatory companies’ alignment with its recommendations.

The first disclosures made under S1 and S2 are expected in 2025.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: How to leverage Generative AI and Large Language Models for regulatory compliance

Generative AI (GenAI) and Large Language Models (LLMs) offer huge potential for change across capital markets, not least in regulatory compliance where they have the capability to help firms understand and interpret regulations, automate compliance, monitor transactions in real time, and flag anomalies in the same timeframe. They also present challenges including explainability, responsibility, model...

BLOG

Compliance Automation Provider Ascent Technologies Acquired by Edgewater Equity Partners

Ascent Technologies, a Chicago-based provider of AI-driven compliance automation, has been acquired by Edgewater Equity Partners, a private equity firm in Boston. The acquisition aims to accelerate development of Ascent’s compliance automation platform and enhance its value proposition to customers. The acquisition is a strategic move for Edgewater Equity Partners, which acknowledges Ascent’s capability in...

EVENT

AI in Capital Markets Summit London

The AI in Capital Markets Summit will explore current and emerging trends in AI, the potential of Generative AI and LLMs and how AI can be applied for efficiencies and business value across a number of use cases, in the front and back office of financial institutions. The agenda will explore the risks and challenges of adopting AI and the foundational technologies and data management capabilities that underpin successful deployment.

GUIDE

Complex Event Processing

Over the past couple of years, Complex Event Processing has emerged as a hot technology for the financial markets, and its flexibility has been leveraged in applications as diverse as market data cleansing, to algorithmic trading, to compliance monitoring, to risk management. CEP is a solution to many problems, which is one reason why the...