IFRS Guide on Sustainability-related risks and opportunities

IFRS Guide on Sustainability-related risks and opportunities

• 18 December 2024
• Sustainability Reporting
• South African Accounting Academy

Summary:

The IFRS Foundation has published a new guide on sustainability-related risks and opportunities and the disclosure of material information.

Article:

This guide is designed to help companies with the fundamental task of identifying and disclosing material information about sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows.

In June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural Standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. The ISSB is committed to supporting the implementation of those Standards. This educational material has been developed as part of delivering on that commitment.

IFRS S1 requires that an entity disclose material information about the sustainability-related risks and opportunities that could reasonably be expected to affect its cash flows, its access to finance or cost of capital over the short, medium or long term.1 These risks and opportunities are collectively referred to as ‘sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects’.

In ISSB Standards, information is material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions of primary users. Primary users are existing and potential investors, lenders and other creditors.

This educational material describes the characteristics of material information and the concept of sustainability-related risks and opportunities. It also explains the requirements related to identifying and disclosing material information about sustainability-related risks and opportunities that could reasonably be expected to affect an entity’s prospects.

This educational material is structured into 3 chapters:

• Chapter 1—The definition of material information and its application in ISSB Standards
• Chapter 2—Sustainability-related risks and opportunities that could reasonably be expected to affect an entity’s prospects and its application in ISSB Standards (this chapter uses examples and explains the factors an entity considers when identifying sustainability-related risks and opportunities)
• Chapter 3—Identifying and disclosing material information (the chapter gives an example of a process an entity could follow to identify and disclose such material information and, in doing so, explains how an entity uses the sources of guidance referenced in ISSB Standards)

Click here to download the 62-page Guide:

https://www.ifrs.org/content/dam/ifrs/supporting-implementation/issb-standards/issb-materiality-education-material.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• It is important to stay informed on publications issued by the regulators and standard-setters, e.g. IFAC.
• As an auditor, independent reviewer, accountant or practitioner, you ned to be aware of the latest guidance issued by relevant regulators, such as the IFRS Foundation.
• This guide is designed to help companies with the fundamental task of identifying and disclosing material information about sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows.

Relevance to Your Clients:

• It is important to stay informed on publications issued by the regulators and standard-setters, e.g. IFAC.
• This guide is designed to help companies with the fundamental task of identifying and disclosing material information about sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows.

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