The objective of our webcast is to explain the disclosure requirements related to the current and anticipated effects of sustainability-related risks and opportunities on a company's financial performance, financial position, and cash flows.

These requirements will be referred to throughout this webcast as current and anticipated financial effects.

Current and anticipated financial effects requirements are part of a company's disclosures about strategy as set out in our standards, which provides information about a company's approach to managing sustainability-related risks and opportunities.

IFRS S-1, General Requirements for Disclosure of Sustainability-Related Financial Information, and IFRS S-2, Climate-Related Disclosures, each referred to as S-1 and S-2, include specific requirements on this topic.

My name is Gabriel Benedict, and I am on the technical staff at the ISSB, joined by Sue

Lloyd, one of our vice chairs.

A few notes before we get started.

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

Further webcasts and materials explaining and illustrating S-1 and S-2 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.

So with that, I will hand over to Sue to provide an overview of our webcast.

Thank you, Gabriel.

So the current and anticipated financial effects requirements and the ISSB standards were developed based on the recommendations of the Task Force on Climate-Related Financial Disclosure, or the TCFD, adapting and expanding upon disclosure of impacts of climate-related risks and opportunities on a company's businesses, strategy, and their financial planning.

Engagement with our stakeholders, including in the feedback that we received on the exposure drafts for S-1 and S-2, provided us with insights into what information helps primary users of general purpose financial reports to better understand how a specific climate or other sustainability-related risk or opportunity has affected or is anticipated to affect a company's financial position, financial performance, and cash flows.

We heard that investors are interested in understanding the relationship and the connection between information about sustainability-related risks and opportunities and information in the financial statements.

The ISSB took this feedback into consideration when we were finalising IFRS S-1 and S-2.

Requirements about current and anticipated financial effects are designed to help establish and explain these connections.

The standards require a company to provide information regarding the financial effects in the current reporting period and the anticipated effects in the short, medium, and long term.

The base requirement is that both qualitative and quantitative information is provided.

However, the ISSB heard from stakeholders that there are circumstances when providing quantitative information can be challenging, so mechanisms were provided in the final standards to help to address these challenges.

Proportionality mechanisms have also been introduced specifically for anticipated financial effects requirements to help companies to apply them.

As we begin, a few points to note on the terminology that we're going to use in 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, a company's financial position, financial performance, and cash flows.

And we use the term a company's 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 provides financial information about a company that is material to investors in making their investment decisions.

Current and anticipated financial effects requirements are designed to produce information that complements or expands upon the information that's provided in a company's related financial statements, identifying and explaining the connections between sustainability related risks and opportunities and the information that's reported in the financial statements.

Importantly, S1 and S2 do not change the requirements in the accounting standards a company uses, but the requirements in S1 and S2 can help inform and be informed by the financial statements prepared by a company, whether they're using IFRS accounting standards or other GAAP.

For example, if a company is assessing whether there's an indication that equipment used in its manufacturing process may be impaired, the sustainability related risks and opportunities that the company has identified when they apply S1 and S2, such as risks related to the availability or cost of natural resources, could be relevant for that impairment assessment.

Related information across a company's reports is an important consideration underpinning current and anticipated financial effects requirements. The ultimate outcome we care about is the provision of general purpose financial reports that are holistic, comprehensive and coherent. At the IFRS Foundation, both of our boards work to ensure our standards support that outcome, both when applied together as a package and when applied in isolation of each other. Accordingly, throughout this webcast, we make references to IFRS accounting standards to highlight the connections between the IASB and the ISSB standards, but we primarily have focus on illustrating how sustainability related financial disclosures expand on or complement the information provided in the related financial statements, regardless of which GAAP is applied by the company when they prepare those financial statements.

We'll be covering the requirements in our standard in two parts in the following sections.

In part one, we'll firstly explain the overarching requirements that apply to sustainability related financial disclosures taken as a whole. We'll then explain requirements for the current reporting period, including how sustainability related risks and opportunities have affected the financial statements, so the financial position, financial performance and cash flows for the current reporting period. Then for the next annual reporting period, including how sustainability related risks or opportunities may pose a significant risk of a material adjustment to carrying amounts within the next annual reporting period. In part two, we'll discuss the anticipated effects of sustainability related risks and opportunities, including determining the short, medium and long term that a company uses. And lastly, we'll spend time on mechanisms to facilitate application and mechanisms to address proportionality that are available for the standards when they're being used by companies. The ISSB introduced proportionality mechanisms for the standards to be applied in a manner proportionate to a company's capabilities and preparedness and to assist all companies when they're applying

S1 and S2. By the end of this two part webcast, you should understand the current and anticipated financial effects requirements and how to provide useful information about a company's strategy for managing its sustainability related risks and opportunities.

To get started, both S1 and S2 include current and anticipated financial effects requirements.

These requirements are the same in both standards. So throughout this webcast, we will often refer to sustainability related risks and opportunities, but note that the same requirements apply to information about climate related risks and opportunities. Disclosure of current and anticipated financial effects are only one of the disclosure requirements within the strategy section of the standards. By considering the overall strategy disclosure objective and other requirements within the strategy section, the role of current and anticipated financial effects requirements and how they interact with other specific disclosure requirements within IFRS sustainability disclosure standards becomes clearer. The elements of the strategy disclosure requirements are presented in logical order in the standards.

However, each element can inform another. For example, the disclosure requirements about resilience and anticipated financial effects are distinct and separate requirements intended to serve different information needs, but can also inform each other. Information on anticipated financial effects is intended to illustrate how a company expects its financial position, financial performance, and cash flows to be affected over time given its sustainability related risks and opportunities and strategy to manage them. Requirements related to resilience of a company's strategy and business model are intended to inform investors about a company's ability to adjust to sustainability related changes, develops, and uncertainties, taking into consideration sustainability related risks. This information about the company's plans to respond could inform the disclosure of anticipated financial effects. So, while the requirements have distinct intent, resilience assessments can provide useful information for current and anticipated financial effects and vice versa. Our webcast is not intended to explain all the information a company might need to disclose when it applies the strategy requirements, but instead will focus on the current and anticipated financial effects requirements.

Nor will we address an exhaustive list of considerations when applying current and anticipated financial effects requirements, as these will differ by company, industry, or circumstance. When disclosing current and anticipated financial effects information,

S1 and S2 ask for both quantitative and qualitative information essentially as the norm.

That is because investors have told us that a combination of both quantitative and qualitative information is most useful for making investment decisions. When providing quantitative information, a company can disclose a single amount or range. Sometimes a range is more useful or appropriate than a single amount. For example, a clothing manufacturer company might be exposed to decreasing demand for its products because of changing consumer preferences for lower carbon alternatives. The entity provides disclosure about the anticipated financial effects of new or potential products that minimize environmental impacts and, due to the level of measurement uncertainty, might report a range of possible future outcomes rather than a single estimate. Quantitative information is important for investors to see how or the extent to which sustainability-related risks and opportunities have affected or may affect the financial statements. Ultimately, management will need to use judgment when providing this information.

The ISSB acknowledges that providing quantitative information, especially related to anticipated effects, might be a challenge. Therefore, the standards include mechanisms that address quantitative information for current and anticipated financial effects if certain conditions are met. This will be discussed in Part 2 of our webcast. Nevertheless, management should keep in mind, while the type of information that has to be provided will vary as a result of circumstances and the mechanisms applied, it is important to note that information about current and anticipated financial effects of sustainability-related risks and opportunities is expected to be material, whether qualitative, quantitative, or both, and therefore this information is expected to be provided in sustainability-related financial disclosure.

As highlighted at the beginning of our webcast, the disclosure requirements related to current and anticipated financial effects are designed to produce information that complements or expands upon information provided in the related financial statements, making connections between sustainability-related risks and opportunities and the information reported in the financial statements.

To understand this interaction, two questions are a helpful starting point. Has the sustainability-related risk or opportunity affected the financial position, financial performance, or cash flows?

And what information about that effect is provided in the financial statements?

Information in the notes to the financial statements may explain how sustainability-related risks and opportunities have affected a company's current financial position, financial performance, and cash flows, so that information could meet the information S-1 or S-2 requires a company to disclose. Because of this, a company may be able to provide the required information by cross-reference to the related financial statements to avoid unnecessary duplication, subject to the specific requirements set out in Appendix B of S-1, being the cross-referenced information is available on the same terms and at the same time. The complete set of sustainability-related financial disclosures is not made less understandable, and the cross-reference clearly identifies the report and specific parts of the report where the information is located.

It is important to understand the context in which the current and anticipated financial effects requirements interact with the broader requirements for connected information set out in the ISSB standards. The standards require connectivity within the reporting package by ensuring the reporting entity, reporting period, reporting timing, and presentation currency should be the same between the financial statements and the sustainability-related financial disclosures. Furthermore, the data and assumptions used in preparing sustainability- related financial disclosures should be consistent to the extent possible, given the accounting standards that the company is applying. Any significant differences should be explained.

Connections between the company's disclosures should be explained clearly and concisely, with unnecessary duplication of information avoided. So, let's take a closer look at the current financial effect requirements. S-1 and S-2 requires companies to disclose information about how sustainability-related risks and opportunities have affected their financial position, financial performance, and cash flows for the current reporting periods. The requirement is to provide quantitative and qualitative information subject to the mechanisms that we'll talk about in Part 2 of the webcast. Sometimes the information could be provided in the financial statements, in which case, as Gabe mentioned, it may be possible to use cross-references to avoid unnecessary duplication. When a company discloses how the sustainability- related risks and opportunities have affected its financial position, financial performance, and cash flows for the current reporting period, part of the information required is information about those sustainability-related risks and opportunities for which there's a significant risk of a material adjustment to carrying amounts within the next annual reporting period for assets and liabilities reported in the related financial statements.

So, let's go to an example. For the purposes of this webcast, we'll be working through each requirement separately, using examples to help explain the requirements. As a result, each example doesn't provide a complete illustration of all the current and anticipated financial effects disclosure requirements. Our first example illustrates disclosure of information about financial effects in the current reporting period. In this case, Company A operates in a country where they manufacture gas-powered hot water heaters. The government's issued a new policy in the current year to ban the use of gas-powered hot water heaters at a future date. As a consequence, the company has decided to shut down its affected production facilities in that country.

Applying applicable accounting standards, such as the IFRS accounting standards, the company determines that this decision has triggered the need for an impairment assessment and that the carrying amount of the facility should be written down, resulting in an impairment loss being recognised for the period. In this example, the financial statements include information regarding the impairment loss, with explanatory information about that loss being included in the notes to the financial statements. In the sustainability-related financial disclosures, subject to considering the mechanisms available to it, Company A will provide information identifying and explaining the connections between its sustainability-related risk and the current financial effects on Company A's financial position and financial performance, in this case explaining the information about the impairment effect and the assessment and the effect. Company A may also be able to consider the use of cross-referencing to the related financial statements if this avoids unnecessary duplication and the criteria are met that

Gabrielle just went through, including including specific references to the notes to the financial statements. Here we have another example to illustrate disclosure of information about financial effects of the current reporting period. This example comes from S1 and relates to a company that has committed to a particular sustainability-related target but where that commitment has not yet affected the company's financial position, financial performance or cash flows because the applicable criteria for recognition in accordance with the relevant gap has not been met. In the sustainability-related financial disclosures, the company might determine that identifying and explaining the fact that the sustainability-related risk, despite the establishment of a target, has not affected the financial position, financial performance or cash flows, is material information that requires disclosure. In some circumstances, a sustainability- related risk or opportunity may pose significant risk of material adjustment within the next annual reporting period to the carrying amount of assets and liabilities reported in the financial statements, in which case the standards require the company to disclose information about that risk.

This requirement complements the requirements in IFRS accounting standards and in some other gap.

Specifically, IFRS accounting standards require a company to provide information about the assumptions it makes about the future and other major sources of estimation uncertainty at the end of the current reporting period and have a significant risk of resulting in material adjustment to the carrying amount of assets and liabilities within the next financial year.

Examples of situations in which there might be a significant risk of material adjustment to the carrying amount of assets and liabilities include situations such as measuring the recoverable amount of assets for impairment purposes or measuring provisions subject to the future outcome of litigation. Consider the previous facility closure example. Company A has concluded that it has met the appropriate criteria to recognize a restructuring provision in accordance with the applicable gap, such as the IFRS accounting standards. As part of its detailed restructuring plan, it is offered to all staff employed at the facility that it is closing the opportunity to seek an alternative role in the organization. The company has committed to compensating all employees if a suitable new role cannot be found. All employees have accepted this offer.

The restructuring plan includes the approximate number of employees who will be compensated for terminating their services, but that number is still highly uncertain at the end of the current reporting period. In its statement of financial position, the company recognized a provision for the estimated cost of compensating employees that will terminate their services and a corresponding expense in its statement of financial performance. Further information about the number of employees who will terminate their service and thus will be entitled to compensation is expected to become available within 12 months after the end of the reporting period. Company A concludes that there is significant risk that this further information could result in a material adjustment to the carrying amount of the restructuring provision within the next annual reporting period.

In the sustainability-related financial disclosures, subject to considering the mechanisms available to it, Company A will provide information identifying and explaining the connections between its sustainability-related risks and the significant risk of a material adjustment to the carrying amount of the restructuring provision in the next annual reporting period, as these estimated costs are uncertain. Company A may consider the use of cross-referencing to the related financial statements if this avoids unnecessary duplication and the necessary criteria are met. Now consider a new example. Company B's assets are increasingly at risk from forest fires and therefore this risk is considered as part of the company's asset impairment analysis for assets exposed to this risk. There is no financial effect in the current reporting period, however, as the frequency and severity of these fires is highly uncertain, the company has determined that information about this uncertainty is material to investors, including the fact that there is significant risk of material adjustment within the next annual reporting period to the carrying amount of these assets as a result of this risk.

In its sustainability-related financial disclosures, subject to considering the mechanisms available to it, Company B will provide information identifying and explaining how the sustainability-related risks present a significant risk of material adjustment to the carrying amount of its assets in the next annual reporting period, given the uncertainty associated with the forest fires. Company B may consider the use of cross-referencing to the related financial statements if this avoids unnecessary duplication and the necessary criteria are met.

We have now reached the end of part one of our webcast on current and anticipated financial effects. Thank you for your attention and here is a quick reminder of the session overview and overall learning objective. We hope you now better understand the overarching requirements for current and anticipated financial effects along with a more detailed understanding of the current financial effects requirements. We look forward to you joining us in part two of the webcast where we will continue our discussion with anticipated financial effects and the mechanisms to facilitate application and the mechanisms to address proportionality.

Thank you for your time.