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Lost in regulation? These are the carbon reporting requirements to know

From the EU’s CSRD to the UK’s TCFD-based climate disclosures: our VP of Climate Finance Marie-Anne Vincent gets into the nitty-gritty of climate reporting regulations.

Goldman Sachs made headlines recently by raising the bar on climate and ESG-related reporting for portfolio companies. With $2.5 trillion under management, this move follows a series of climate reporting announcements by regulators and competitors.

In the United States (US), a proposal to mandate reporting came out in March while companies in the United Kingdom (UK) filed climate disclosures for the first time this month. Global sustainability reporting standards are also on the way.

How can CEOs, CFOs, and finance teams keep up? Here’s a guide to help you get around the alphabet soup of climate reporting regulations.

1. The Taskforce on Climate-Related Financial Disclosures (TCFD): A common ground for corporate sustainability

📎TCFD in brief

The TCFD framework aims to make climate risk and climate resilience integral to financial reporting. They cover 4 core pillars for companies to disclose their approach to understanding and managing the impact of climate change on their financial performance.

• Governance: The organization’s governance around climate-related risk and opportunities

• Strategy: The actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning

• Risk management: The processes used by the organization to identify, assess, and manage climate-related risks

• Metrics and targets: Assess and manage relevant climate-related risks and opportunities

As of 2021, over 2,600 organizations supported the TCFD framework, with a combined market capitalization of $25 trillion. These organizations span 89 different countries and jurisdictions, highlighting the global support for climate risk reporting. Additionally, 1,069 or nearly 41% of these TCFD supporters are financial institutions, responsible for $194 trillion in assets.

🇬🇧 The UK

The UK was the first country to include the TCFD concept in regulatory policy via the Bank of England. It introduced requirements for regulated firms to integrate climate financial risk into their governance and strategy, risk management, and disclosure in 2019.

🏦 Central Banks

The pioneering approach has since been endorsed by the Network for Greening the Financial System (NGFS), an international alliance of central banks and prudential supervisors which the US Federal Reserve joined last year. The European Central Bank has introduced a similar set of supervisory expectations that extended the principle to include environmental as well as climate risk.

🇪🇺 The European Union

The European Union (EU) is also expanding its sustainability reporting requirements. The EU is following a systematic and centralized approach toward climate transition and sustainability disclosure. Its regulatory regime is underpinned by the European Climate Law that legally endorses the EU’s commitment to meet the Paris agreement. To achieve climate neutrality by 2050, European legislators have introduced a slew of regulatory measures that will accelerate capital allocation toward green investments.

The European Financial Reporting Advisory Group (EFRAG) is currently developing the EU Sustainability Reporting Standards (ESRS). These standards are expected to become part of European legislation when the Corporate Sustainability Reporting Directive (CSRD) is adopted and transposed into national law by 1 December 2022. European companies will then have to provide binding information on their sustainability information in their annual reports for the financial year 2023 in accordance with the ESRS. The CSDR upgrades the 2014 non-financial reporting directive (NFDR) and seeks to improve the coverage and reliability of sustainability reporting.

When the CSRD comes into effect in 2023, there’ll be close to 50,000 European and Europe-based companies that disclose sustainability information - four times as many compared to today. Whereas the SEC regulation will target only publicly-listed companies.

🇺🇸 The US

The US Securities and Exchange Commission (SEC) announced a proposed rule on climate-related disclosures on 21 March, 2022. The SEC’s proposal is the latest in a long line of proposals based on the TCFD framework to emerge around the globe.

🌐 Towards global reporting requirements

This is only a small snapshot of countries that are looking into implementing climate and other sustainability reporting requirements, such as Japan, Singapore, Hong Kong, and New Zealand.

The number is expected to increase as the newly established International Sustainability Standards Board (ISSB) publishes its new global baseline for sustainability reporting. On 31 March 2022, ISSB released exposure drafts of the first two IFRS Sustainability Disclosure Standards (ISSB Standards) for public consultation:

IFRS S1: General requirements for disclosure of sustainability-related financial information

IFRS S2: Climate-related disclosures

The ISSB indicated that its aim is for the complete set of ISSB Standards, once finalized, to provide a comprehensive global baseline of sustainability disclosures for investors in global capital markets to use when assessing the value of companies.

The General Requirements Standard proposes to require sustainability-related risks and opportunities to be disclosed following 4 themes: governance, strategy, risk management, and metrics and targets. These are the same 4 pillars the TCFD uses in the climate context and that forms the architecture of the SEC’s March 2022 proposed climate-related disclosure rules.

2. Protect society or protect investors: The concept of double materiality

The ISSB and CSDR initiatives aren’t in competition with each other and have committed to cooperate. But the approaches taken by ISSB and CSRD are very different.

💰 Single or Financial Materiality serves the investors (ISSB or SEC proposals)

The ISSB states its corporate reporting standard will meet the needs of investors. It focuses on the financial materiality of ESG and climate risks that could affect investors.

🐾 Double materiality serves the society (CSRD)

The CSRD goes beyond the ISSB by including "double materiality," meaning the impact of a company on the environment and not just how climate affects a company.

The CSRD also takes a much more ambitious approach on the environment beyond climate (e.g. water and biodiversity) and social, calling for a just transition. For example, the European taxonomy’s environmental approach safeguards respect for human rights behind the principles “do no significant harm” and “minimum social safeguards”.

In a seeming attempt to demonstrate a bridge between single and double materiality, the ISSB’s summary of the General Requirements Standard notes that “information about a company’s impacts and dependencies on people, the planet and the economy [would be considered material] when relevant to the assessment of the company’s enterprise value”.

3. Some differences but a shared objective

We can spot some differences in the proposed standards but the main goal remains the same: to promote sustainable economic development and prevent greenwashing by creating globally binding and comparable reporting standards for companies.

It’s important to note the various standards now take into consideration the company’s impact on its value chain as an increasingly important environmental, social, and governance (ESG) issue, and require disclosure of information about material sustainability-related risks across a company’s value chain (scope 3 emissions).

Companies would be required to disclose their absolute scope 1 (direct emissions from operations), scope 2 (energy use), and scope 3 (from their broader value chain) greenhouse gas (GHG) emissions, and they’ll need to calculate their emissions in line with the GHG Protocol methodology.


Investors have high expectations of the new sustainability standards, as they facilitate the decision making process for future investments.

On one hand, the regulations mean additional reporting work for companies. But on the other, they increase their chances of gaining competitive advantages by tapping into new capital.

As these regulations approach, companies that haven’t established ESG reporting should start doing so as soon as possible.

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