Briefing on ISSB Exposure Drafts:

Creating a comprehensive global baseline

April 25/26 briefing with a focus on climate-related disclosures
for close stakeholders of the SASB Standards and Integrated
Reporting framework
Housekeeping

• All participants will be muted throughout today’s

presentation

• Please use the Q&A function on Zoom to ask a

question to any of our speakers

• The slides from today’s webinar will be shared in

a follow-up email

2
Today’s Speakers

Laura Nelson Rommie Johnson Emily Gaston Jing Zhang

Associate Director Technical Strategy Lead Analyst Head of Climate Strategy
Market Engagement Financials Sector Lead
SASB Standards

3
Agenda

1 Brief overview: ISSB introduction and exposure drafts

2 General requirements exposure draft

3 Climate-related disclosures exposure draft

5 Regulatory developments: ISSB, US SEC, EFRAG

5 What’s next? Action items for SASB and <IR> stakeholders

The future is now
There will be three concurrent public consultations and market feedback will shape the future – not only
of the exposure drafts and other proposals, but also of future standard setting and interoperability.
DEADLINES

29 International Sustainability Standards Board (ISSB) Exposure Drafts

JULY

20 US SEC proposal to enhance and standardize

MAY climate-related disclosures for investors

EFRAG exposure drafts of

31 European Sustainability Reporting Standards
JULY

Even if you are entirely satisfied with the direction of travel, Similarly, jurisdictional efforts will be shaped by feedback –
the ISSB needs to see support for its chosen approach in including on how they are or could be compatible with
comment letters in order to continue down this path. international work (ie ISSB).
International Sustainability
Standards Board (ISSB)
Introduction to ISSB and Exposure Drafts
ISSB: formed in response to demand from investors and businesses
to simplify the global sustainability disclosure landscape

Develop standards for global baseline of sustainability disclosures

Focus on meeting the information needs of investors

Enable companies to provide comprehensive sustainability information

for the global capital markets

facilitate the addition of requirements that are jurisdiction-specific or aimed at

a broader group of stakeholders via a building blocks approach
Simplifying the disclosure landscape:
the future of VRF resources
ISSB will build on SASB Standards in six key ways

Industry-based approach ISSB will embed SASB’s industry-based approach into its standard-setting process

Inclusion in
SASB Standards play a key role in the Climate and General Requirements Exposure Drafts
exposure drafts

Internationalisation Addressing the international applicability of SASB Standards is a priority for the ISSB

SASB Standards will serve as the starting point for the ISSB’s industry-based requirements, and the
Starting point ISSB will assume responsibility for the evolution and enhancement of SASB’s 77 industry-based
Standards

Project continuity Ongoing projects by the SASB will be transitioned to the ISSB

The ISSB encourages preparers and investors to support and use SASB Standards in this
Encourages use
transition phase
ISSB exposure drafts respond directly to market demand
We must act now to cement TCFD, SASB and <IR> into the global baseline

The initial ISSB exposure

drafts are out, and we believe
they address market needs.
However, the ISSB will need
market feedback to...
Secure the final positioning of VRF
resources, including SASB Standards &
the <IR> framework

Set the course for future ISSB Standards

development and priorities

Demonstrate market support for a

global baseline approach (e.g. building
blocks)
Two proposed IFRS Sustainability Disclosure Standards

General Requirements Climate

Exposure Draft Exposure Draft
Link Link
General Requirements Disclosure
Summary of Exposure Draft
 General Requirements Exposure Draft creates a
common structure for sustainability disclosures

Governance Strategy Risk Metrics and

The governance The sustainability- management targets
processes, controls related risks and How sustainability- Information used to
and procedures a opportunities that related risks are manage and monitor
reporting entity uses could enhance the identified, assessed, the entity’s
to monitor entity’s business managed and performance in
sustainability-related model and strategy mitigated. relation to
risks and over the short, sustainability-related
opportunities. medium and long risks and
term. opportunities over
time.
General Requirements Exposure Draft: Key points

Requires companies to provide material information on all

significant sustainability-related risks and opportunities
necessary to assess enterprise value
• Other IFRS Sustainability Disclosure Standards (eg Climate Standard) set
out specific disclosures

• Points to other standards and frameworks in absence of a specific IFRS

Sustainability Disclosure Standard, including:
▪ SASB Standards for identifying sustainability-related risks and
opportunities and to develop appropriate disclosures

• ‘Equivalent’ to IFRS Accounting Standards IAS 1 and IAS 8

▪ Boundaries, fair presentation, connectivity, comparative information,
timing, location, etc.
Climate-related Disclosure
Summary of Exposure Draft
Climate-related Exposure Draft incorporates core
components of TCFD recommendations and SASB Standards

Requirements for disclosure of material information about

significant climate-related risks and opportunities

Fully incorporates TCFD recommendations

Includes climate-related industry-based requirements from

SASB Standards

Requires disclosure of information about;

• physical risks (e.g. flood risk)
• transition risks (e.g. regulatory change)
• climate-related opportunities (e.g. new technology)
 Exposure Draft Climate Standard = TCFD + SASB

Consistent with TCFD Builds on SASB Standards

• Governance • Industry-based disclosures in Appendix
• Strategy B derived from SASB Standards
• Risk management • 68 industry-based volumes help
• Cross-industry metrics and preparers identify relevant requirements
targets • Proposed changes to:
• Illustrative guidance • Internationalize metrics
• Add financed emissions disclosures
 Requires information that enables investors to …

•• determine
determine the
theeffects
effects ofofclimate-related
climate-related risks
risksand
and opportunities
opportunities on
on the
the
company's
company's enterprise
enterprise value
value

•• understand
understand the
thecompany’s
company’s response
response to
toand
and strategy
strategy for
formanaging
managing its
itsclimate-
related
climate-related
risks andrisks
opportunities
and opportunities

•• evaluate
evaluate the
theability
ability ofofthe
thecompany
company to toadapt
adapt its
itsplanning,
planning, business
business model
model and
operations
and operations
to climate-related
to climate-related
risks risks
and opportunities
and opportunities

Consistent
Consistent with
withthe
theGeneral
General Requirements
Requirements Exposure
Exposure Draft
Draft
•• focus
focusisison
on significant
significant climate-related
climate-related risks
risksand
and opportunities
opportunities
•• information
information provided
provided must
mustbe bematerial
material for
forassessments
assessments ofofenterprise
enterprise value
value
 Climate-related Exposure Draft: Governance

Proposed
Climate Disclosure
Requirements “The objective of climate-related financial
disclosures on governance is to enable
Governance
users of general purpose financial reporting
to understand the governance processes,
Strategy

Risk
Management controls and procedures used to monitor
Metrics and
and manage climate-related risks and
Targets opportunities.”
 Climate-related Exposure Draft: Strategy
“The objective of climate-related financial disclosures
Proposed on strategy is to enable users of general purpose
Climate Disclosure financial reporting to understand an entity’s strategy
Requirements
for addressing significant climate-related risks and
opportunities.”
Governance

Strategy Climate-related risks and opportunities – physical and transition

Risk
Management Business model and value chain

Metrics and
Strategy and decision-making – transition plans, targets and
Targets carbon offsets

Financial position, financial performance and cash flows

Climate resilience – scenario analysis or alternative technique

 Climate-related Exposure Draft: Risk Management

Proposed
Climate Disclosure
Requirements “The objective of climate-related
financial disclosures on risk
Governance management is to enable users of
Strategy general purpose financial reporting to
Risk understand the process, or processes,
Management
by which climate-related risks and
Metrics and
Targets
opportunities are identified, assessed
and managed.”
 Climate-related Exposure Draft: Metrics and Targets
“The objective of climate-related financial disclosures on metrics and
Proposed targets is to enable users of general purpose financial reporting to
understand how an entity measures, monitors and manages its
Climate Disclosure significant climate-related risks and opportunities. These disclosures
Requirements shall enable users to understand how the entity assesses its
performance, including progress towards the targets it has set.”
Governance
Cross-industry metric categories Industry-based requirements
Strategy
Greenhouse gas emissions

Risk Transition risks

Management In preparing these disclosures, an
Physical risks entity shall consider whether
industry-based metrics (built on
Metrics and Climate-related opportunities SASB Standards) associated with
Targets
Capital deployment disclosure topics could be used in
whole or part to meet the
Internal carbon prices requirements

Remuneration
 Climate-related Exposure Draft: GHG Emissions

Greenhouse gas emissions

Proposed Absolute gross Scope 1-3 emissions* and emission intensity for each scope
Climate Disclosure
Requirements For Scope 1-2 emissions disclosed For Scope 3 emissions disclosed
• Includes upstream and downstream
Disclose emissions separately for: emissions
• the consolidated accounting group (the
• The categories included to enable users to
Governance parent and its subsidiaries);
understand which Scope 3 emissions are
• associates, joint ventures, unconsolidated included, or excluded
Strategy subsidiaries or affiliates not included in the
consolidated accounting group • When the entity’s measure of Scope 3
emissions includes information provided
Risk by entities in its value chain, it shall explain
The approach used to include emissions for the
Management the basis for that measurement
entities includes associates, joint ventures,
unconsolidated subsidiaries or affiliates (for example, • If the entity excludes those GHG emissions,
the equity share or operational control method in the it shall state the reason for omitting them
Metrics and Greenhouse Gas Protocol Corporate Standard)
Targets
The reason for the choice of approach and how that
relates to the disclosure objective for metrics and
targets
 Climate-related Exposure Draft: Interrelated requirements
Context
• Many requirements are interrelated with others—including across core elements
Proposed (ie governance, strategy, risk management, metrics and targets) and within an element.
Climate Disclosure
Proposed Examples
Requirements • Industry-based requirements may be used to fulfil—or complement—the cross-industry
metric categories
Cross-industry metric category Industry Industry-based metric
Governance Greenhouse gas emissions Semiconductors • percentage of Scope 1 emissions
associated with perfluorinated compounds
Strategy (TC-SC-110a.1)
Physical climate risk exposure Agricultural • percentage of key crops sourced from
Risk products water-stressed regions (FB-AG-440a.2)
Management Transition risk exposure Commercial • (1) gross exposure to carbon-related
Banks industries, by industry, (2) total gross
exposure to all industries, and (3)
Metrics and percentage of total gross exposure for
Targets each carbon-related industry (FN-CB-1)
Climate-related opportunities Chemicals • revenue from products designed for use-
phase resource efficiency (RT-CH-410a.1)
Climate-related capital Oil & Gas – • investments in renewable energy (EM-EP-
deployment Exploration & 420a.3)
Production
 Climate-related Exposure Draft: International Applicability
Context
• The TRWG climate prototype, issued in November 2021, included 341
Proposed industry-based disclosure topics and associated performance metrics
Climate Disclosure sourced from SASB Standards.
Requirements • 11% of the metrics exhibited a regional bias that may inhibit application
across jurisdictions. This regional bias was found in the underlying
technical protocol; not in the core concepts.

Governance
Approach to the Exposure Draft
Strategy
• Designed and executed 12 workstreams (technical research and targeted
consultation)
Risk
Management
• Proposed enhancements to 36 metrics, e.g.:
Former Proposal
Metrics and Electric Utilities industry: US Energy Independence IEA
Targets “smart grid technology” Act
Across nine industries: US Renewable Fuel Generic definition
“renewable fuel” Standard
Across three industries: EnergyStar (US EPA) Refers to jurisdictional
energy efficiency of products standards
 Climate-related Exposure Draft: Financed and
Facilitated Emissions
Context
Proposed • No explicit GHG emissions disclosure topic and metric(s) exist in the
Climate Disclosure •
SASB's financials sector industries, despite the need for industry-based disclosure
Rapidly evolving field
Requirements • Small piece of a larger puzzle e.g., portfolio alignment and target setting

Proposal
• New disclosure topic titled "Transition Risk Exposure" in 4 out of 7 industries in the
Governance financials sector.
• A description of the methodology used to calculate financed and facilitated emissions
Strategy (all 4 industries)

Risk Industry Metric

Management
Commercial Banking • Exposure to carbon related industries
• Financed emissions (Scope 1, 2 & 3) at industry and asset
Insurance
class level
Metrics and
Targets Investment Banking and Brokerage • Facilitated emissions (Scope 1, 2 & 3) by business line and
industry
• Revenue generated by business line and industry
Asset Management and Custody • Financed emissions at AUM level
Activities
Regulatory Developments
ISSB, US SEC and EFRAG
Key areas of alignment between US SEC and ISSB

Investor focus
• Investors are the primary users

Based on TCFD framework

• SEC/ISSB: Both include specific governance, strategy and risk management reporting
requirements
• Similar TCFD principles used to define climate-related physical risks and transition risks

Similar GHG emissions disclosures

• SEC: Scope 1, 2 GHG disclosure required, Scope 3 if material; ISSB: Scope 1, 2, 3 required if
material
▪ Financed and facilitated emissions: ISSB also proposes specific industry-based requirements
for financial institutions
• Both approaches are consistent with GHG Protocol
▪ ISSB requires this methodology; SEC positively refers to but not required at this time
• SEC Proposal mandates local jurisdictional assurance requirements (jurisdictional requirement)
Key areas of alignment between US SEC and ISSB

Materiality
• Information is material if it “could reasonably be expected to influence” investors (ISSB) or there is a
substantial likelihood a reasonable investor would consider it important (SEC)
▪ Over short, medium and long term
• Under SEC, certain disclosures are required regardless of materiality:
▪ Scope 1 and 2 GHG emissions
▪ Risk Management & Governance disclosures
• Under ISSB, all disclosure requirements are subject to issuer determination of materiality

Location of disclosure
• ISSB proposes that information be disclosed as part of the general purpose financial reporting
package
▪ To prevent conflicts with jurisdictional regulatory requirements, ISSB does not specify a particular
location within general purpose financial reporting
• SEC mandates disclosure in registration statement or annual reports
▪ Climate-related financial impacts required in footnote in financial statements (Regulation S-X)
▪ Qualitative disclosures in S-K portion of annual report
Key areas of alignment between US SEC and ISSB

Transition plans / Scenario analysis / Targets and goals

• Similar reporting requirements based on TCFD framework
• ISSB proposes specific strategy reporting requirements related to transition plans, scenario analysis and
plans to achieve targets
• SEC requires disclosure of transition plans, scenario analysis and targets, if used
▪ Safe Harbor protection over climate-related forward-looking statements (jurisdictional regulation)
• SEC/ISSB: Both require transparency around the role of offsets, if used

Financial performance disclosures

• SEC/ISSB both require disclosure of the effects of climate-related risks on financial performance in the
current period, as well as anticipated effects over the short, medium and long term
▪ SEC: requires disclosure of financial impact of severe weather and transition activities with more than
1% financial impact on a financial statement line item
▪ ISSB requires disclosure of climate impacts on financial performance for the reporting period but does
not stipulate a quantitative threshold

Reporting date
• SEC/ISSB: Both require climate disclosures at the same time as financial reporting
 VRF views on the US SEC consultation
• There is substantial alignment between SEC Proposed Climate Disclosure Rule (SEC
Proposal) and [draft] IFRS S2 Climate-Related Disclosure Standard (ISSB Exposure Draft)
• This represents a concrete step toward a global baseline of investor-focused climate
disclosure
• This alignment can reduce burden on issuers

• We encourage the SEC to allow Foreign Private Issuers (20-F filers) to use ISSB Standard
disclosure to meet SEC climate reporting obligation
• This is an opportunity to further increase alignment between SEC and ISSB and is
consistent with SEC allowance for use of IFRS Accounting Standards

• The industry-based requirements of the ISSB are significantly additive (and

complementary) to SEC proposal
• The SEC could encourage use of the proposed ISSB Climate standard for supplemental
industry-based disclosures
• Longer-term, the SEC could consider use of the ISSB General Requirements standard
for material sustainability disclosures on topics other than climate
European Sustainability Standards:
next steps to consultation
• EFRAG Project Task Force has published working drafts of proposed sustainability
standards

• Working drafts include 22 general and topic-focused standards.

• Proposed standards have been developed using the EU’s double materiality
concept

• Final text of the Corporate Sustainability Reporting Directive (CSRD), including any
reference to alignment with international standards and applicability to companies
domiciled outside of the EU, is under negotiation

• We believe that the ISSB standards can be used as a “building block” by the EU to
guide investor-focused disclosures about how sustainability impacts affect
enterprise value.
Next Steps
Market feedback is critical
VRF views on the ISSB consultation: SASB Standards
• The ISSB has responded to investor demand in a manner that is cost effective for
preparers:
• The General Requirements Exposure Draft, by leveraging TCFD’s structure and SASB’s
industry-based standards, enables businesses to provide material information about a
range of sustainability risks and opportunities
• The Climate Exposure Draft, by integrating TCFD’s content and SASB’s industry-based
climate disclosures, enables businesses to provide material information about climate
risks and opportunities
• The ISSB’s commitment to use an industry-based process for standards development will
provide comparable information that is both decision useful for preparers and cost-
effective for preparers
• We welcome the decision to prioritize internationalizing the SASB standards
• The ISSB should prioritize evolving and enhancing SASB Standards, and moving the SASB
Standards through ISSB due process, to ensure investor information needs are met and
company feedback continues to be incorporated into the Standards.
 The future is now
There will be three concurrent public consultations and market feedback will shape the future – not only
of the exposure drafts and other proposals, but also of future standard setting and interoperability.

DEADLINES

29 International Sustainability Standards Board (ISSB) Exposure Drafts

JULY

20 US SEC proposal to enhance and standardize climate-related

MAY disclosures for investors

EFRAG exposure drafts of European Sustainability

31
JULY Reporting Standards

• Even if you are entirely satisfied with the direction of travel, • Similarly, jurisdictional efforts will be shaped by
the ISSB needs to see support for its chosen approach in feedback – including on how they are or could be
comment letters in order to continue down this path. compatible with international work (ie ISSB).
Questions?
Please share your feedback
 Thank you for your ongoing support!

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