IFRS S2 Climate-Related Disclosures: Strategy Disclosures

Continuing the discussion on IFRS S2, this article focusses on requirements in IFRS S2 related to Strategy.

The objective of climate-related financial disclosures on strategy is to enable users to understand an entity’s strategy for managing climate-related risks and opportunities. Entities should disclose:?

1.????? Climate-Related Risks and Opportunities:

·?????? Description: Describe risks and opportunities that could affect the entity’s prospects.

·?????? Classification: Explain if risks are physical (e.g., extreme weather events) or transition risks (e.g., regulatory changes).

·?????? Time Horizons: Specify the time horizons (short, medium, long term) for expected impacts.

·?????? Definitions: Define what the entity considers short, medium, and long term and link these to strategic planning horizons.

2.????? Business Model and Value Chain:

·?????? Current and Anticipated Effects: Disclose how climate-related risks and opportunities impact the business model and value chain, identifying areas of concentration (geographical, facilities, asset types).

3.????? Strategy and Decision-Making:

·?????? Response to Risks and Opportunities: Provide information on how the entity responds to and plans for climate-related risks and opportunities, including resource allocation, mitigation and adaptation efforts, and transition plans.

·?????? Progress Monitoring: Report with quantitative and qualitative data on progress towards plans disclosed in previous periods.

4.????? Financial Position, Performance, and Cash Flows:?

·?????? Current Effects: Detail the impact of climate-related risks and opportunities on financial position, performance, and cash flows for the reporting period.

·?????? Anticipated Effects: Project future financial impacts over the short, medium, and long term, considering the entity’s strategy and financial planning.

5.????? Climate Resilience:

·?????? Scenario Analysis: Use climate-related scenario analysis to assess resilience, disclosing the entity’s ability to adapt or adjust its strategy and business model to climate change.

·?????? Scenario analysis modelling & assumptions: How and when the climate-related scenario analysis was carried out and the key assumptions used in developing models.

Please reach out to Tin Wei, Hong , Anne Liew or me if you want to know more about IFRS S2.