Over the recent years, many companies are encountering climate-related risks and opportunities. As the impact of climate change intensifies, investors and regulators are increasingly seeking greater transparency of climate-related information in the financial statements. The presentation of the impact of climate-related matters in the financial statements depends on specific facts and circumstances, including the nature and extent of those impacts on the company. IFRS Standards (or Ind AS) do not refer explicitly to climate-related risks or climate-related matters, but they implicitly require relevant disclosures in the financial statements when climate-related matters considered material in preparing the financial statements. Therefore, to provide climate related disclosures companies are required to consider the overarching requirements in IAS 1, Presentation of Financial Statements and requirements in individual standards as well. Recently, the IFRS Foundation republished its educational material on climate-related disclosures to reiterate requirements in IFRS Accounting Standards to report on the effects of climate-related matters in the financial statements when those effects are material. This edition of Accounting and Auditing Update (AAU) contain an article on this topic which highlights the requirements in accounting framework to report on the effects of climate related matters on the financial statements.

The publication also carries an article on sustainable finance. Sustainable finance refers to the process of taking Environmental, Social and Governance (ESG) considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects. The increasing awareness of ESG has transformed the landscape of the financial sector. The focus on stability and ethical practice is gaining importance over attractive quantitative returns on investment. All nations are introducing regulations to boost sustainable finance including India. The article discusses the developments in the area of sustainable finance, highlights Organisation for Economic Co-operation and Development (OECD)’s publication on ‘ESG Investing: Practices, Progress and Challenges’ and actions taken in India.

As is the case each month, we have also included a regular round-up of some recent regulatory updates in India.

We would be delighted to receive feedback/suggestions from you on the topics we should cover in the forthcoming editions of the AAU.

For more information on this update, please write to aaupdate@kpmg.com.