Climate scenario analysis for TCFD & ISSB-related reporting and disclosures

Financial institutions including pension funds, insurance companies and banks are facing an ever-increasing volume of legislated and voluntary reporting obligations, alongside an array of guidelines and principles from international regulators and federal governments.

Most notably, the International Sustainability Standards Board (ISSB), formed by the International Financial Reporting Standards (IFRS) Foundation, released the first detailed IFRS S2 Climate-related Disclosures in 2023. This global standard, aligned with the TCFD recommendations, sets out the requirements for using climate scenario analysis to assess a financial institution’s climate-related risks and opportunities. The implementation of the IFRS S2 standard at a localized jurisdiction level has commenced worldwide, including in Australia, Canada, United Kingdom, Malaysia, Japan, Hong Kong and Singapore, reflecting the widespread support for globally consistent and complete disclosures to manage climate financial risks.

Against this background, financial institutions are subject to additional incoming mandatory and voluntary disclosure and reporting standards depending on their industry, size, operating structure and assets under management (AUM). These standards, which are being set internationally and locally may differ for each individual financial institution. Many of these TCFD & ISSB-related frameworks within this rapidly evolving landscape will likely require the involvement of climate scenario analysis to some extent.