My name is Gabriel Benedict, and I am on the technical staff at the ISSB, joined by Sue Lloyd, one of our vice chairs.

As we get started, you can find our standards on our website, which includes the appendices as well as the basis for conclusions and accompanying guidance, which refer to as, collectively, the standards and related materials.

Our webcast and materials explaining and illustrating S1 and S2 can also be found on our website.

Finally, the views expressed in this webcast are those of myself and Sue.

They are not necessarily those of the ISSB or the IFRS Foundation.

As a reminder of our objective, our webcast is to explain the disclosure requirements related to the current and anticipated financial effects of sustainability-related, including climate, risks and opportunities on a company's financial performance, financial position, and cash flows, also referred to as current and anticipated financial effects.

Current and anticipated financial effects requirements are part of a company's disclosures about strategy, which provide information about a company's approach to managing sustainability-related risks and opportunities.

As we begin, one last reminder regarding terminology for our webcast.

We use the term investors to refer to primary users of general-purpose financial reports who are existing and potential investors, lenders, and other creditors.

We use the term financial effects to refer to the effects on the financial statements and being a company's financial position, financial performance, and cash flows.

And we use the term reporting package to refer to the general-purpose financial reports, the package of information that includes both the financial statements and our sustainability-related financial disclosures, which provide financial information about a company that is material to investors in making investment decisions.

Our first topic in Part 2 pertains to anticipated effects.

Companies are required to provide information about how it expects its financial position, financial performance, and cash flows to be affected over the short, medium, and long term, given its strategy to manage sustainability-related risks and opportunities.

To determine how management expects its financial position to change over the short, medium, and long term, a company considers investment and disposal plans, for example, capital expenditure, major acquisitions and disposals, including plans the company is not contractually committed to, and plan sources of funding to implement their strategy.

A company must consider information about decisions made that may result in future inflows and outflows that have not yet met the criteria for recognition in the related financial statements.

As discussed in Part 1, the standards ask a company to provide quantitative and qualitative information subject to the mechanisms available to it, and allows a company to disclose a single amount or range when disclosing quantitative information.

Applying anticipated financial effects requirements will require management judgment.

The ISSB introduced proportionality mechanisms to enable disclosure requirements to be scalable when relevant, which we will discuss shortly.

Now, on to an example to illustrate the anticipated financial effects disclosures.

For the purposes of this webcast, we will be working through each requirement separately, using examples to help explain each requirement.

As a result, each example does not provide a complete illustration of all current and anticipated financial effects disclosure requirements.

So, Company C has a transition plan that relies on the replacement of a third party's financial status to the company's diesel-powered fleet with electric vehicles over the next five years.

The plan is to replace each vehicle as it reaches the end of its useful life.

The company has reviewed the residual values of the fleet and concluded that no changes to the depreciation rates or the useful lives are required.

Company C determines that there are no current effects on the financial position, financial performance, and cash flows reported in the financial statements arising from this climate-related risk and opportunity, which might be information that Company C wants to provide.

In its sustainability-related financial disclosures, subject to considering the mechanisms available to it, Company C will provide information identifying and explaining the connections between their vehicle transition plan, as this is part of its strategy to manage sustainability-related risks and opportunities and the anticipated financial effects.

While considering materiality, Company C may need to explain that the transition plan will have consequences for its future cash flows and its accounting, as reflected in the related financial statements, and that this is consistent with its transition plan.

Company C may be able to disclose the capital investment plan per year, provided as a single amount or range, providing information to help investors understand the anticipated financial effects of managing its sustainability-related risks and opportunities, the expected investment to install charging points, and the plan to transition their fleet evenly over the next years, the anticipated reduction in fuel costs for their new electrified fleet, and disclose that this plan does not require new sources of funding if deemed material information.

As with all our examples, it is important to note that there could be other effects and considerations specific to the company, so this is not an exhaustive list of all the considerations.

When providing anticipated financial effects information, a company needs to specify the time horizons over which the effects could reasonably occur, and explain how it defines short, medium, and long-term, including how these are linked to the planning horizons used by the company for strategic decision-making.

This is another area of management judgment.

There is no one-size-fits-all approach to determining short, medium, and long-term risks.

This approach leverages the TCFD recommendations.

The TCFD believed that if they were to define such time frames for all companies across sectors for short, medium, and long-term, an approach could hinder a company's consideration of climate-related risks and opportunities that are specific to their business, and the ISSB has applied the same logic for sustainability-related risks and opportunities.

Not specifically defining time frames requires management to use judgment to determine those relevant to their own circumstances.

Companies may do so using different factors, including industry-specific characteristics such as cash flow, investment and business cycles, the planning horizons typically used in a company's industry for strategic decision-making, and capital allocation plans, and the time horizons over which investors conduct their assessment of a company in that industry.

To illustrate, time horizons could differ if a company were a manufacturer of perishable goods, a software business, or in mining and exploration.

So, let's move on to the final topic, the mechanisms that were included to proportionality.

So, we'll look at these two different types of mechanisms.

So, the mechanisms to facilitate application, which apply both to disclosures about current and anticipated financial effects, and the mechanisms that address the range of capabilities and level of preparedness of entities around the world to apply the standards, and therefore address challenges entities could have with resource constraints, data availability, and the and they only apply to the anticipated financial effects disclosures.

So, taken together, these mechanisms are intended to support companies to provide information and to assist them in applying the current and anticipated disclosure requirements that we included in S1 and S2.

So, let's start with these mechanisms to facilitate application that apply to both current and anticipated financial effects.

So, when referring to both current and anticipated financial effects, companies need not provide quantitative information, or at least more emphasis is put on qualitative information, related to a sustainability-related risk or opportunity if either the current or anticipated effects are not separately identifiable, or if the level of measurement uncertainty that's involved is so high that the resulting quantitative information might not be useful.

Both of these concepts, although they're used in a different context, have been taken from IFRS accounting standards.

So, let's look at the first criterion.

Practically speaking, it may not be possible in some cases for management to separately identify the financial effects of an individual's sustainability-related risk and opportunity, and that's because the financial effects could arise from multiple risks or opportunities, and they could affect multiple line items of the related financial statements.

Regarding the second criteria on measurement uncertainty and assessing whether information is useful, it might be helpful to consider the conceptual foundations that are included in is useful if it is relevant and faithfully represents what it ought to represent.

This is helpful to keep in mind when considering disclosure of quantitative information with a high level of measurement uncertainty.

If a company determines that it's not required to provide quantitative information about current or anticipated financial effects, applying these criteria mentioned above, then the company is required still to provide information, but that information is an explanation of why it hasn't provided quantitative information, and qualitative information about the financial effects, including identifying the line items, the totals, and the subtotals within the related financial statements that are likely to be affected or have been affected by that information, but about the combined effects of that sustainability-related risk or opportunity with other sustainability-related risks or opportunities and other factors affecting it, unless the company determines that that quantitative information about combined financial effects would not be useful.

So let's consider the following example.

Company D has identified a climate-related transition risk and is experiencing a decline in revenue from the sale of its diesel vehicles.

The company believes that this is due to a change in consumer demand, but it cannot separately identify the effect of the change in consumer demand that's associated particularly with climate transition risk from other factors that are affecting the demand and the consequences for revenue.

This means that they conclude they cannot separately identify the effect of the climate-related transition risk to quantify it.

Although only one of the criteria needs to be met to qualify for this relief or assistance for disclosure, in this case the company also does conclude that as a result of the difficulty of separating, it also cannot quantify the effects on revenue from this particular aspect of the change in consumer demand with the appropriate level of measurement uncertainty.

It concludes there's a high level of measurement uncertainty, so high that it would affect the usefulness of the information.

As a result of those assessments, Company D determines that it's unable to provide quantitative information about the current financial effects of the climate-related transition risk.

So Company D is able to apply the mechanisms to facilitate application and to provide qualitative information about the line items, totals and subtotals within the related financial statements that have been affected.

In this case, for example, this would include identifying the revenue line item in the statement of financial performance as a line item affected by this risk.

In addition, Company D would provide quantitative information about the combined financial effects of the change in consumer demand and other factors which have resulted in a decrease in revenue if that information is determined to be useful.

These disclosures will identify and explain the connections between the sustainability-related risks and the decrease in revenue that's reflected in the current period financial statements.

Company D may be able to consider the use of cross-referencing to information in the related financial statements if this avoids unnecessary duplication and the criteria set out in the standards are met, including specific references to the notes.

Now that we've talked about the mechanisms to The ISSB has introduced proportionality mechanisms to support preparers in dealing with data availability and to scale the requirements in S1 and S2, specifically considering the range of capabilities and preparedness of companies around the world to apply the requirements.

More specifically, proportionality mechanisms have been introduced to support companies in dealing with resource constraints, noting that the cost of investing in and operating the systems and processes necessary for applying the anticipated financial effects requirements are proportionately higher for some entities.

Data availability, noting the high quality external data is less available in some markets, industries, and parts of the value chain.

And specialist availability, noting that skills and expertise are less available to some companies and in some markets.

Proportionality mechanisms only apply to anticipated financial effects.

The criteria to apply these include companies being able to use all reasonable and supportable information that is available to the company at the reporting date without undue cost or effort and an approach being used that is commensurate with the skills, capabilities, and resources that are available to the company for preparing those disclosures.

So, let's dive into the first proportionality mechanism.

The concept of all reasonable and supportable information that is available to the entity at the reporting date without undue cost or effort is beneficial if entities apply the parameters for the type of information to consider and for the effort required to obtain such information.

Determining what qualifies as reasonable and supportable information involves a company to consider all the information that is reasonably available, including information an entity already has, having an appropriate basis for using the information, and considering information available at the reporting date, including information about past events, current conditions, and forecasts of future conditions.

A company cannot ignore information that would inform its disclosure, nor is a company expected to carry out an extensive search for such information.

The information should be available without undue cost or effort.

At the same time, companies cannot argue that no effort is necessary, because information about sustainability-related risks and opportunities that could reasonably be expected to affect the company's prospects would be useful to investors.

The greater the usefulness of the information about a sustainability-related risk or opportunity is to investor, the greater the undue cost and effort can change over time as circumstances change.

Now moving to the second proportionality mechanism, when we think about skills, capabilities, and resources, this might include both internal and external skills, capabilities, and resources.

As it relates to disclosing information about the anticipated financial effects of a particular sustainability-related risk or opportunity, an entity with fewer resources may be limited in its ability to quantify the anticipated effects of such a risk or opportunity.

Skills, capabilities, and resources might also provide context to inform consideration of the potential cost or level of effort required in preparing anticipated financial effects information.

It is important to note that a company need not provide quantitative information about the anticipated financial effects of a sustainability-related risk or opportunity if it does not have the skills, capabilities, or resources to provide that quantitative information.

However, for the avoidance of doubt, if resources are available to the company, then it will be able to invest in obtaining or developing the necessary skills and capabilities.

If quantitative information about the anticipated effect of an individual risk or opportunity is not provided, the company will need to explain why it has not provided quantitative information, provide qualitative information about those anticipated financial effects, including identifying the line items, totals, and subtotals within the related financial statements that are likely to be affected or have been affected by that sustainability-related risk or opportunity, and provide quantitative information about the combined effects of that sustainability-related risk or opportunity with other sustainability-related risks or opportunities and other factors affecting it unless the company determines that quantitative information about the combined effects would not be useful.

Note, under both types of mechanisms, the information that needs to be provided as a result of not providing quantitative information for the financial effects of a sustainability-related risk or opportunity are the same.

Consider this example on using an approach that is commensurate with the skills, capabilities, and resources.

Company E is a small beverage manufacturer that depends on the availability and quality of local water resources, which are affected by an increase in drought conditions due to climate change.

This, in turn, could affect the manufacturer's operations and its ability to produce its goods, thus presenting a climate-related physical risk.

If the manufacturer sees this risk as longer-term, which the company has defined as greater than five years, and the company performs strategic planning for only the next five years, providing useful quantitative information related to this effect may not be possible based on the company's skills, capabilities, and available resources.

The company might know that consulting firms and large beverage companies have the capabilities or resources to develop sophisticated anticipated effects related to drought or to water availability risks, but if Company E does not have the resources available to hire a third party to obtain this information, the company may disclose why quantitative information was not provided and provide qualitative disclosures.

It may also provide information about the combined anticipated financial effects if it determines to be material for investors.

So, bringing part two of our webcast to a close, let's reflect on some key takeaways.

So, current and anticipated financial effects requirements are designed to produce information that complements or expands upon the information that's provided in the related financial statements, making connections between the sustainability-related risks and opportunities information and the information reported in the financial statements.

A combination of both qualitative and quantitative information is the most useful to enhance investors' understanding of sustainability-related risks and opportunities.

We've discussed the mechanisms to facilitate application and mechanisms to address proportionality that are available in the standards and the information that's required when they're applied.

The mechanisms included in the standards are to provide a balance between the need for decision-useful information while considering a company's capabilities and level of preparedness, particularly when it comes to providing quantitative information about the financial effects of sustainability-related risks and opportunities.

And throughout the discussion, we've really underscored the crucial role of management in applying judgment.

Companies need to apply judgment in determining whether they meet the specified conditions for when they do not need to provide quantitative information about current and anticipated financial effects.

The objective of this two-part webcast was to provide you with better understanding of the disclosure requirements related to current and anticipated financial effects in the ISSB standards, identifying its importance and providing useful information about a company's strategy disclosures.

We appreciate your engagement and thank you for joining us.