While global policymakers say progress has been made toward the adoption of climate-related financial reporting standards, few jurisdictions have implemented mandatory or voluntarily reporting on their own, according to the Financial Stability Board (FSB) and the International Financial Reporting Standards Foundation (IFRS Foundation).
In a pair of reports published Tuesday, the organizations said that over the past 12 months, jurisdictions that represent approximately 57% of global GDP have made progress toward using the standards developed by the International Sustainability Standards Board (ISSB), or other standards.
This reported progress includes 14 jurisdictions that have issued or proposed disclosure requirements that are aligned with the recommendations of the Task Force on Climate-related Disclosures (TCFD), and 16 jurisdictions, primarily in emerging markets, that have started introducing sustainability-related disclosure requirements for the first time.
The FSB said 19 of its 24 member jurisdictions now have “regulations, guidelines or strategic roadmaps” for climate-related disclosures; and that 17 FSB jurisdictions have set, or proposed, disclosure requirements based on the ISSB standards, along with the recommendations by the TCFD.
However, only Europe has mandated reporting for fiscal 2024.
A handful of other markets have mandated reporting for future reporting periods, including Australia (2025), Brazil (2026) and China (2027).
Regulators in Canada have made progress too — including the Office of the Superintendent of Financial Institutions (OSFI) updating its guideline on climate risk management, which includes disclosure expectations; the Canadian Sustainability Standards Board (CSSB) has proposed draft standards, which are expected to be finalized by the end of 2024; and the Canadian Securities Administrators (CSA) are expected to revise rules on climate-related disclosure requirements once the CSSB standards are final. But at this point, disclosure has yet to be mandated in the country.
The reports also noted that the number of companies making some disclosure that is aligned with the TCFD standards has increased, but that “more progress is necessary.”
Specifically, the IFRS Foundation (which took over monitoring of corporate compliance from the FSB) reported that, in fiscal 2023, only about 2–3% of companies are reporting in accordance with all of the TCFD standards.
It also noted that 82% of companies are now reporting in line with at least one of the TCFD disclosures, and 44% are providing at least five of the recommended disclosures.
“Companies’ progress in disclosing climate-related financial information using the TCFD recommendations or ISSB standards is encouraging,” the IFRS Foundation report said.
“Nevertheless, few companies are disclosing climate-related financial information that provides information about the company’s governance, strategy, risk management, and metrics and targets — especially as it relates to the effect of climate change on their businesses, strategies and financial planning.”
The IFRS Foundation warned that this lack of information could hinder the ability of investors, lenders and other creditors “to assess and price climate-related risks and opportunities.”
It also stressed that regulatory fragmentation — policymakers tailoring the ISSB standards to their own markets, particularly by omitting certain requirements — may conflict with the goal of delivering timely, comparable financial information to capital markets.
“This fragmentation adds complexity to those using the information and adds costs and complexities to preparers of information subject to inconsistent regulatory requirements,” the organization said.