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IIRC sets out five key points to the FSB Task Force on Climate-related Financial Disclosures

The Financial Stability Board Task Force on Climate-related Financial Disclosure is asking for feedback on its recommendations by 12 February. The IIRC encourages all interested parties to consider the following:

1. Inclusion in mainstream financial disclosures: Support the recommendation that material climate-related financial disclosures should be included within mainstream financial filings.

The strength of the Task Force’s recommendations is that the disclosure recommended is fully integrated in financial reporting. However, to be fully effective, the IIRC believes the corporate reporting system should enable investors and businesses to understand the inter-relationship between their impact on natural capital and impact on broader value creation. Therefore, Task Force recommendations should be implemented within the context of the objective of realignment of the corporate reporting system, with the aim of achieving more integrated strategic, narrative and financial information providing greater decision-useful insights for providers of financial capital.

2. Greater emphasis on value-creation as well as financial risk: We believe it would be useful for investors if there is greater emphasis on businesses explaining the opportunities as well as the risks from climate change and the transition to a low carbon future. This is a necessary part of encouraging the new investment required. It also means that the necessary starting point is the strategy of the business, which is a key part of Integrated Reporting. Internal governance processes should be realigned to meet this objective.

3. Effective risk management: the integration of climate-related risks within the overall risk management processes of a business is an essential element in strengthening corporate governance. This is a key part of the Task Force’s recommendations and should be strongly supported.  As the Task Force report establishes, climate risks are multi-dimensional and the multi-capitals approach set out in the International <IR> Framework should be explicitly referenced in implementation.

4. Alignment of the corporate reporting landscape: the Task Force’s observation that a corporate reporting landscape of multiple disclosure frameworks and standards creates complexity and that the principles outlined in the report should provide an opportunity for greater alignment.

It is important to note that the major corporate reporting standard-setters and framework providers in the world have already established the Corporate Reporting Dialogue, with the explicit objective of greater aligning reporting requirements. Several of these organisations jointly met with the Task Force and have agreed to collaborate on the implementation of its recommendations, starting with a joint response to this public consultation. It would be helpful for the Task Force to explicitly acknowledge these developments, which will assist in implementation at a later stage.

5. The offer of the IIRC movement to support implementation: In addition to our common efforts with other members of the Corporate Reporting Dialogue, the IIRC as a market-led coalition, and having established a principles-based Framework which is now being implemented in over 30 countries worldwide, stands ready to promote the implementation of the Task Force recommendations.

In addition to advocacy we will promote best practice and work with local partners to refine practice, engage with regulators and create supportive peer networks.