On 31 October, the International Public Sector Accounting Standards Board1 (IPSASB®) released the draft of the world’s first climate-related disclosure standard tailored for public sector entities globally, with support from The World Bank. Marking a landmark moment, this draft of the inaugural Sustainability Reporting Standard (IPSASB SRS™) is now available for public comment.

Background

At its December 2022 meeting, the IPSASB acknowledged the significance of sustainability reporting for the public sector and initiated several related projects. By June 2023, the board decided to advance the development of a climate-related disclosures standard tailored for the public sector. This exposure draft is currently open for public consultation until 28 February 2025.

To know more, visit - https://www.ipsasb.org/news-events/2024-10/ipsasb-issues-draft-groundbreaking-climate-related-disclosures-standard-public-sector

Objective of the standard

The draft standard proposes new sustainability reporting requirements for public sector entities, focusing on two key areas:

  • Climate-related risks and opportunities affecting the entity’s own operations2.
  • Climate-related public policy programs3  and their outcomes, where applicable4.

These disclosures are designed to provide primary users of general-purpose financial reports with relevant information that supports decision-making and enhances accountability. The proposed requirements aim to help public sector entities communicate how climate-related factors may impact their financial and operational performance, while also demonstrating the effectiveness of their climate-related policy actions.

These proposals seek to align public sector reporting with global best practices, building on established international sustainability standards, while also addressing the unique characteristics and information needs of primary users of public sector reports. This approach ensures that public sector entities meet global expectations while providing relevant and tailored information for effective decision-making and accountability.

Applicability criteria

IPSASB standards are designed for public sector entities that meet the following three criteria:

a. Are responsible for the delivery of services (encompassing goods, services, and policy advice, including to other public sector entities) to benefit the public and/or to redistribute income and wealth
b. Mainly finance their activities, directly or indirectly, by means of taxes and/or transfers from other levels of government, social contributions, debt, or fees
c. Do not have the primary objective to make profits

Relationship with other standards

The draft standard adopt disclosure requirements from established private sector frameworks, primarily the TCFD (Task Force on Climate-related Financial Disclosures) and ISSB’s standards especially IFRS S2 (climate related disclosures), specifically for reporting climate-related risks and opportunities that impact an entity's own operations.

The proposals also introduce additional requirements specific to the public sector's ability to exercise sovereign power in setting policies, such as through legislation, regulation, and spending on programs aimed at driving behavioral change among other public sector entities, private sector organizations, and households. These requirements are designed to integrate the Global Reporting Initiative (GRI) standards, which focus on multi-stakeholder outcomes, to facilitate reporting on the results of climate-related public policy programs.

IPSASB

Source: IPSAS releases

The draft standard also builds on existing public sector guidance, including the IPSASB Conceptual Framework, as well as RPG5 1 (Reporting on the Long-Term Sustainability of an Entity’s Finances) and RPG 3 (Reporting Service Performance Information) and IPSAS.

The four pillars of reporting

Under the draft standards, the key pillars of reporting are aligned with the TCFD (Task Force on Climate-related Financial Disclosures) and IFRS S2 standards. These pillars are:

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The objective is to enable primary users of general-purpose financial reports to understand the governance processes, controls, and procedures an entity uses to monitor, manage, and oversee the Climate-related risks and opportunities to its own operations and Climate-related public policy programs and their outcomes.

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The objective is to enable primary users of general-purpose financial reports to understand an entity’s strategy for managing the Climate-related risks and opportunities to its own operations and Climate-related public policy programs and their outcomes.

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The objective of climate-related disclosures on risk and outcome management is to enable primary users of general-purpose financial reports to understand an entity’s processes to identify, assess, prioritize and monitor:

    Climate-related risks and opportunities to its own operations, including whether and how those processes are integrated into and inform the entity’s overall risk management process; and
    Anticipated and unanticipated challenges to the achievement of the intended outcomes of the climate-related public policy programs, including whether and how those processes are integrated into and inform the entity's overall risk management process.

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The objective is to enable primary users of general-purpose financial reports to understand an entity’s performance, including progress towards any climate-related targets it has set, and any targets it is required to meet by law or regulation, in relation to Climate-related risks and opportunities to its own operations and Climate-related public policy programs and their outcomes.

Next steps

Our recommendations for next steps fall under two broader categories, as outlined below:

  • National standard-setters are encouraged to respond to the exposure draft and engage with the IPSASB to share their views. They are also encouraged to consider the future implementation of the standards and think about how they can support public sector entities in the implementation process." 
  • Other public sector bodies are encouraged to consider the impact of climate on their operations and developing their strategies.

The draft standard, and expected subsequent standards6 , will accelerate improved and more robust disclosure of the impact of climate in the public sector. Organizations should start planning for this and ensuring they have the appropriate mechanisms in place to report accurately.

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Source

IPSASB SRS Exposure Draft 1, Climate-related Disclosures | IPSASB

Footnotes

1Developer of international reporting standards for use by governments and other public sector entities around the world
2Own operations include all the activities in an entity’s operational model.
3Public policy programs are any type or set of interventions taken or mandated by a public sector entity exercising its sovereign powers to influence the decisions or behaviors of other entities or individuals.
4when the entity has responsibility for those programs and their outcomes.
5Recommended Practice Guide.
6IPSASB has prioritized key research areas, including: general requirements for the disclosure of sustainability-related financial information, and natural resources and non-financial disclosures.